Indonesia to lower 2016 growth target to 5.1% in state budget

[JAKARTA] The Indonesian parliament is set to revise down this year's economic growth target amid slowing domestic consumption and signs a shortfall in tax revenue will sap public spending.

Ahmadi Noor Supit, head of the house's finance commission, set the forecast at 5.1 per cent, compared with 5.3 per cent in the current state budget, after a debate that extended late into Tuesday evening. That was the middle ground between Finance Minister Bambang Brodjonegoro's 5.2 per cent proposal, the central bank's 5.1 per cent and lawmakers who called for 5 per cent. Gross domestic product increased 4.79 per cent last year, the least since 2009.

"Considering issues on exports, slowing consumption and private investment that hasn't accelerated enough, we need to correct the growth assumption," Brodjonegoro said during the meeting. "Five-point-one per cent is a number that makes sense for the government."

The revision highlights President Joko Widodo's struggle in keeping his election pledge to boost annual expansion to 7 per cent in a nation that's taken a hit from drops in commodity prices over the last few years.

South-east Asia's largest economy grew a less-than-expected 4.92 per cent last quarter even after the government took steps to open up more to foreign investors, cut red tape and boost spending on infrastructure.

The finance commission's decision will need to be rubber stamped by the parliament's fiscal agency before being approved, along with the entire 2016 budget, at a plenary meeting.

The commission also agreed on assuming an average rupiah exchange rate of 13,500 a dollar this year and an inflation rate of 4 per cent, Mr Supit said. The currency has averaged 13,435 so far in 2016.

BLOOMBERG