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136713
Sun, 08/08/2010 - 23:59
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News Focus: LOW GOVT SPENDING MAY AFFECT 2010 GROWTH TARGET

By Suharto

Jakarta, Aug 8 (ANTARA) - The Indonesian economy grew at a higher pace in the first half of 2010 but low government spending in the first semester may affect the economic growth target of 5.8 percent this year.

The government spending stood at Rp395.8 trillion in the first half of this year, accounting for 35.1 percent of the target set in the revised 2010 state budget. Compared to the same period a year earlier, the figure fell 2.2 percent.

In a working meeting with the House of Representatives budgetary committee last July, Finance Minister Agus Martowardojo said the realization of the government budget in the first semester of 2010 saw a surplus of Rp45 trillion - Rp50 trillion.

"Until June, the budget recorded a surplus of Rp 45 trillion - Rp 50 trillion because of higher-than-expected state revenue and slower spending," he said.

The minister said government officials' poor project preparations and regulation hurdles were among others to blame for the sluggish government spending.

"In relation to the realization of the state budget until June and its prognosis until the end of this year, so far we see the realization of government budget has never reached 100 percent," he said.

The government was trying to speed up the absorption of state budget funds and apply a reward and punishment system to ministries and institutes in realizing the budget, he said.

What was important now was encouraging the ministries and institutes to increase the realization of their budget to avoid budget leftover rather than punishing them for failing to do so, he said.

"But once again, I think the budget will not be 100 percent absorbed," he said.
Government spending, especially on infrastructure projects, is seen as important economic stimulus.
In yet another move to speed up the absorption of the state budget, President Susilo Bambang Yudhoyono in a national working meeting at the Bogor Presidential Palace on Friday (Aug 6) said he had endorsed amendments to a government regulation and two presidential decrees.

The amended government regulation concerns construction services, while the two presidential decrees deal with procurement of goods and services for the government, and guidelines for the realization of the state budget.

The newly-amended government regulation and presidential decrees carry a number of new clauses aimed at speeding up development activities, facilitating the realization of projects and the absorption of the state budget.

The amendments to the three rulings had passed through long discussions which culminated at the two-day national working meeting, the President said.

The government deemed it necessary to revise the presidential decree on procurement of goods and services as many parties had considered the old decree as too rigid, he said.

He expressed hope the newly-revised presidential decree would be more flexible and contain fewer bureaucratic requirements.

The revisions were motivated by the wish to achieve better results,he said. "We must not deviate from the path to this aim," he said
Government consumption contributed 23.5 percent to the second-quarter growth of 2.8 percent this year. This represented a 9 percent decline compared with the corresponding period last year.
The Central Statistics Agency (BPS) said on Thursday (Aug 5) the economy grew 5.9 percent in the first half of 2010, helped by growing exports, imports and household consumption,
Household consumption grew 4.5 percent, gross fixed capital formation 8.0 percent, exports 17.2 percent and imports 20.1 percent, however, government consumption fell 8.9 percent, BPS Deputy Head for Balance Sheet and Statistical Analysis Slamet Sutomo said.

Based on an increase in gross domestic product (GDP) the domestic economy in the second quarter of 2010 expanded 2.8 percent compared to the first quarter of 2010 and 6.2 percent compared to the second quarter of 2009, he said.

"The GDP based on the current prices and the 2000 constant prices in the second quarter of 2010 reached Rp1,572.4 trillion and Rp573.7 trillion respectively," he said.

The second-quarter growth of 2.8 percent was driven by household consumption which rose 1.2 percent, government consumption 23.5 percent, gross fixed capital formation 2.3 percent, exports 2.7 percent and imports 5.1 percent, he said.

Compared to the same period last year, the economy in the second quarter of 2010 grew 6.2 percent, fueled by household consumption which increased 5.0 percent, gross fixed capital formation 8.0 percent, exports 14.6 percent and imports 17.7 percent, while government consumption fell 9.0 percent, he said.

Yet the finance minister said he was optimistic that the economy would grow 5.9 percent this year, or higher than the target of 5.8 percent set in the revised 2010 state budget.

"We are optimistic the full-year growth will reach 5.9 percent," he said.

He said the second-quarter economic growth of 6.2 percent had shored up the government's confidence to achieve the economic growth of close to 6 percent this year.
"In the second quarter the economy grew 6.2 percent, or higher than our target of 5.8 percent so we predict the full-year economic growth will reach 5.9 percent," he said. ***2***
(S012/a/ H-NG /a014 )

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