Small Effect of Stimulus

VIVAnews - It is estimated that the fiscal stimulus, mainly the budget for government's project, will not affect the real sector too significantly. An economist of the Indonesia Economic Intelligence (IEI) Sunarsip questioned the government's intention.

"No matter how high the government provides stimulus, it will have small effect," he said on Sunday, March 29.

The reason for this was that the composition of the government's expenditure in the 2008 GDP only reached 8.4 percent.  "It is possible that the Rp 1,000 trillion (US$87 billion) State Budget was not fully absorbed," he said.

Sunarsip stated that it is important to support other components of the GDP such as domestic consumption by 61 percent in the 2008 GDP, investment by 27.7 percent, exports by 29.8 percent, and imports by 25.6 percent.

Nevertheless, he considered that the stimulus is needed to trigger the real sector. "All private projects will face difficulties if there isn't any buffer from the government," he added. "For example, constructing toll roads without the assurance from the government will not make it," he said.

Since the fiscal stimulus will add to the government's debt, Sunarsip thought that the government should take careful steps on domestic funding. "If [the government] isn't careful, [they] will end private and real sector's businesses," he added.

He cited 15 percent state bonds' interest rate needs to be lowered to below 10 percent. "If it's not lowered, the private [companies] will not take loans. They will turn to bank loans," he said.

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Translation: Ariyantri E. Tarman