JAKARTA. The National Economic Committee (KEN) predicts that Indonesia’s economic growth will stand at 5.2 to 5.5 percent in 2015, lower than the government’s projection of 5.8 percent in the 2015 state budget.
KEN deputy head, Raden Pardede, said that growth was predicted to be slightly higher than at the end of 2014, thanks to foreign direct investment coming into Indonesia and the country’s positive investment climate.
He added that by 2015, the government would have cut spending on fuel subsidies, which had absorbed Rp 350 trillion [US$28 billion] from the 2014 state budget. The reduction of subsidies would help reduce government spending and make available additional funds.
“Any additional funds left over from the subsidy reduction can be used for infrastructure and social security projects,” Raden said Friday, as quoted by Antara news agency.
KEN is also predicting that the positive investment climate would drive up consumption and rejuvenate government spending, at least until the second semester of 2015.
However, the implication of rising fuel and electricity prices could increase inflation next year to between 6.5 and 7.5 percent.
In addition, Bank Indonesia’s monetary policy of increasing the central bank’s interest rate to 8.5 percent from its current 7.5 percent could play a significant role in the rising rate of inflation.
“The rupiah will also fluctuate due to capital flow related to the US Federal Reserve’s interest rate,” he added.
Meanwhile, the country’s current account deficit is forecast to decrease to between 2.3 to 2.4 percent of Gross Domestic Product (GDP), due to an expected decline in imports.
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