Article: Economy of Fiscal

Tuesday, August 3, 2010

Mohammad Hatta

We have entered the second half of 2010, Indonesia's economy is predicted to lead to steady improvement. Economic growth is mainly the volume of world trade is currently subject to further improvement. On the other hand the real sector as the spearhead of economic stretching Indonesia is also expected to follow suit.

Some of the government's success in improving the economy looks from economic indicators in the form of positive economic growth, recorded in the first half of 2010 amounted to 5.8 percent. Then, the low volatility of the rupiah and the controlled rate of inflation, even deflation had occurred in the month of March 2010 of 0.14 percent.

Similarly, the investment performance is also expected to experience improvement seknifikan, reflected in foreign capital inflows and continued efforts to improve the business climate in the country. First half of 2010 investment grew by 8.7 percent in 2009 compared to only 2.9 percent. Semester 2 fixed investment is expected to be positive at least about 8.6 percent.

Conditions are expected to lead to greater economic growth in the second half of 2010. World Bank's own quarterly report predicts Indonesia's economic growth this year will reach 5.9 percent more optimistic than the budget assumption of 5.6 percent. In fact, the World Bank predicts economic growth will increase to 6.2 percent in 2011.

The second half, the actual moment of good to realize a relatively high growth, including more focus on the importance of quality economic growth. Economic growth alone will drive faster growth in various sectors. Moreover, external factors are quite promising. The current global economy shows recovery (recovery) as a result of the efforts of various countries through fiscal stimulus, banking and financial sector regulation, especially in the United States and Europe. On the other hand the budget deficit and the debt crisis in Greece, Spain and Portugal as well as several other European countries have shown signs of improvement which will certainly affect the performance of the global economy until the end of 2010.

Basically the European fiscal crisis is not really a negative effect on the performance of the domestic financial market, in fact precisely the trend shows the high capital inflows (capital inflow). It also affects the appreciation of the rupiah exchange rate, so that the front half of the average predicted value of fixed exchange rate will experience a strengthening. Strengthening of the rupiah which has occurred since the end of 2009 continued through 2010. Januari first half to June 2010 average exchange rate reached Rp9.100 per dollar, stronger than the previous year which amounted to Rp9.733 per U.S. dollar. Thus the average exchange rate during the year 2010 is predicted to range from Rp9.00 - 9200 per U.S. dollar. During the first half of 2010, the average appreciation of the rupiah against the U.S. dollar gained about 4.6 percent compared with the end of 2009.

System improvement budget

Similarly, economic recovery, especially in Asia, and the growing strength of domestic economic fundamentals petumbuhan reflected in higher exports and investment, continue to encourage the strengthening of rupiah appreciation. Including rising foreign exchange reserves recorded at the end of June amounted to U.S. $ 76.3 billion.

Central Bureau of Statistics also show a month May 2010 exports were up 36 percent over the same month in 2009 or U.S. $ 12.52 billion. While the period from January to May 2010 rose 47.68 percent or U.S. $ 60.1 billion the same period in 2009. Recorded non-oil exports also rose in the month of May 2010 at 39.93 percent, or USD 8.93 billion compared to May 2009. On the import side alone also increased by 53.26 percent in May 2010 or the period of January to $ 51.25 billion over the same period last year. The increase in exports and imports showed excitement and recovery in world commodity demand which previously sluggish global financial crisis. The stability of the rupiah were also driven by higher debt outlook Indonesia rupiah-denominated and foreign currency, so we took the rating from stable to positive (Ba2).

So far, the government and Bank Indonesia continues to maintain the rupiah exchange rate volatility. Therefore, monetary policy would caution should continue to apply. This policy is expected to maintain exchange rate stability and prevent excessive volatility and maintain adequate reserves to meet the fundamental needs of the economy. In addition, coordination and increased effectiveness of regulation and monitoring of foreign exchange flows should continue to be done to sustain a prudent monetary policy.

The Government is expected to continue improving the system and more flexible budgeting mechanisms. Absorption of the budget sought to commence in January without any gap absorption that has occurred in which the projects and budget allocations flowed fastest in May or June. This means extending the absorption gap and the budget allocation, that is necessary to reform the system or mechanism of the budget (budget reform). Which of course has no meaning if the House does not support it.

This is important because if Indonesia wants significant growth in the spread of the absorption of the budget as a fiscal stimulus can be disbursed during the period or the beginning of semester one, so the multiplier effect is expected to be over run and effective. Similarly, the effectiveness of the allocation of absorption in those sectors that provide high multiplier like the real sector in the field of SMEs, agriculture and production of high employment and regional development through infrastructure improvements.

Sure, it's great PR for the next government, which in turn is coupled and clarified its control system. This also answers the issue that many local stakeholders who do not dare to use the budget as a risk factor or a finding dimejahijaukan Commission, so that the edges are parked in a lot of money allocated to the banking or securities.

Finally, the second half of this need for caution, because the start of economic recovery, it will cause demand for various commodities both domestically and abroad continues to rise as oil prices, palm oil and others. This will trigger a surge in prices which then led to the inflation target further away. Especially the second half of this meeting the annual cycle of both the feast day of Eid and Christmas and New Year, where the price of basic commodities will usually be creeping up. It can not be avoided. What is clear is the government's duty to provide and prepare a public facilities, including infrastructure, so that the distribution and flow of goods will be maintained and run properly.

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