Saturday, August 17, 2013

Indonesia unveils growth-boosting election year budget

Indonesia's president unveiled an ambitious 2014 draft budget Friday aimed at boosting a slowing economy before elections next year as his scandal-plagued party struggles to claw back popularity.

Once a darling with investors, Southeast Asia's top economy has this year been faced with slowing growth, high inflation and a plunge in the value of the rupiah.

With the economy set to be a key battleground at presidential and legislative polls in 2014, President Susilo Bambang Yudhoyono is desperate to restore the nation's financial health.

Announcing the $173-billion budget to parliament, Yudhoyono insisted the package would ensure that "Indonesia will be in a better position to overcome the challenges that may emerge".

The main themes of the budget were boosting consumer spending, a main driver of Indonesia's economic boom, overhauling the nation's ageing infrastructure to encourage investment, and narrowing current account and budget deficits.

He said the government would implement a "keep buying strategy" to make sure consumer spending remained strong, something economists believe is key to maintaining economic growth as global demand for Indonesian commodities weakens.

"We acknowledge our infrastructure is far from perfect," he conceded, vowing that major road, port and airport projects would be completed.

Investors often complain that doing business in the sprawling archipelago of more than 17,000 islands is complicated by potholed roads, a creaking train network, leaky old boats and poor aviation infrastructure.

He also said the country would look at new markets to try to put the brake on a widening trade deficit, blamed on falling Chinese demand for Indonesian exports such as coal and palm oil.

Yudhoyono insisted he had already helped to lift some of the strain off the budget by hiking the price of fuel by up to 44 per cent in June, reducing huge subsidies that were blamed for making the budget deficit balloon.

The budget still needs parliamentary approval.

The president's ruling Democratic Party faces a tough time at next year's elections following a string of scandals affecting leading party figures and without any obvious successor for Yudhoyono.

The president cannot stand in 2014 as he is constitutionally barred from running for a third term. - Channel News Asia

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