Finance Minister believes economy to grow faster in 3rd,4th quarters

Jakarta (Antara News) - Finance Minster Sri Mulyani said she believes the Indonesian economy will grow more rapidly in the third and fourth quarters of 2006 than in the two previous quarters as economic activities on the ground have improved.

"We hope the economy in the third quarter will show consistent signs of strong growth. The economy grew 5.2 percent in the second quarter and is expected to grow 5.5 percent in the third quarter," she said after a limited cabinet meeting at the presidential office here on Thursday.

The indicator of improving economy in the third quarter was a good momentum for economic growth or economic recovery so President Susilo Bambang Yudhoyono had asked relevant ministers to maintain it to restore confidence in the country`s economy and translate it into a real climate conducive for investments, she said.

To that end, the president had assigned the finance minister and the coordinating minister for economic affairs to study the possibility of the government providing additional incentives to maintain the upward trend in investment inflows and the good momentum of economic growth, she said.

"Both of us will study the possibility. We will assess all sectors considered critical and crucial to get the incentives. We will study it further. Some sectors have production difficulties and face competition particularly from China besides smuggling problems," she said.

Despite the improving signs of economic growth, the economy was expected to grow 5.6 percent this year, falling short of the target of 5.8 percent set in the revised 2006 State Budget, she said.

"The economy is expected to grow 5.5 percent in the third quarter and six percent in the fourth quarter. But on average it will likely to grow 5.6 percent or slightly lower this year," she said.

She said the increase in the economic growth in the third quarter was the result of value added taxes on foreign economic transactions including those on imported and export goods.

The increase in production activities including the import of capital goods and chemical goods was another factor, she added.

The minister also said until Oct 13 the revised 2006 State Budget still suffered a deficit of Rp6.3 trillion, well below the target of Rp42.4 trillion. State receipts accounted for 74.2 percent of the total, state expenditures 66.3 percent, goods expenditures 48.45 percent and capital expenditures 47.74 percent.

"Until the third week of October the State Budget suffered a deficit of Rp6.3 trillion or close to the target with expenditures standing at Rp25.2 trillion," she said.

On the impact of declining global oil prices on the revised 2006 State Budget, she said the government still had to consider it carefully.

"The government continues monitoring oil prices carefully. When the oil price stands at US$60 per barrel, US$55 per barrel and US$50 per barrel, we will see tax and natural resource receipts on the one hand and expenditures on the other. In general, if oil prices drop to US$55-US$50 per barrel, the total of oil subsidies will decline up to Rp25 trillion," she said.

After all, the drop would not have a significant impact on the revised 2006 State Budget because the amount was not too big compared to the deficit, she said.(*)
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