VZCZCXRO0494
PP RUEHCHI RUEHCN RUEHDT RUEHHM
DE RUEHJA #0106 0201007
ZNR UUUUU ZZH
P 201007Z JAN 09
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC PRIORITY 1278
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS COLL
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHKO/AMEMBASSY TOKYO 2988
RUEHBJ/AMEMBASSY BEIJING 5864
RUEHBY/AMEMBASSY CANBERRA 3553
RUEHUL/AMEMBASSY SEOUL 5360
RUEHGP/AMEMBASSY SINGAPORE 6433
RUEAIIA/CIA WASHDC
RHEHNSC/NSC WASHDC

UNCLAS JAKARTA 000106 
 
SIPDIS 
SENSITIVE 
 
DEPT FOR E, EAP/MTS, EAP/EP, EEB/IFD/OMA AND EEB/EPPD 
TREASURY FOR IA/MALACHY NUGENT AND TRINA RAND 
USAID/ASIA/AA FOR MARGOT ELLIS 
USAID/EGAT/AA FOR MARK SILVERMAN 
COMMERCE FOR 4430/KELLY 
DEPT PASS FEDERAL RESERVE SAN FRANCISCO FOR CURRAN 
DEPARTMENT PASS EXIM BANK 
SINGAPORE FOR SUSAN BAKER 
TOKYO FOR ROBERT KAPROTH 
DEPT PASS USTR WEISEL, EHLERS 
 
E.O. 12598: N/A 
TAGS: EFIN EINV ECON ID
SUBJECT: INDONESIAN GOVERNMENT PROPOSES INCREASING BUDGET DEFICIT TO 
ADDRESS GROWING IMPACT OF FINANCIAL CRISIS 
 
REF:  Jakarta 62 
 
¶1. (SBU) Summary.  With the global economic outlook remaining 
uncertain, the Indonesian government has announced plans to revise 
its 2009 budget to increase the budget deficit to 2.5% of GDP, up 
from 1%.  If Parliament approves the revised budget, the government 
plans to carry out additional fiscal stimulus aimed at preventing 
growing unemployment and other impacts of the global financial 
crisis, despite declining government revenues.  Economic 
Coordinating Minister and Finance Minister Sri Mulyani Indrawati 
remains confident that Indonesia will maintain economic growth 
greater than 3%, and considers the government's revised economic 
growth rate target of 4.5-5.5%  attainable if the government is able 
to implement timely counter-cyclical measures to maintain domestic 
demand.  End summary. 
 
Preparing for Worst, Hoping for Best with Strong Counter-cyclical 
Policy 
- - - - - - - - - - - - 
 
¶2. (U) In a January 14 speech to the Indonesian Council on World 
Affairs, Economic Coordinating Minister and Finance Minister Sri 
Mulyani Indrawati spoke at length about the government of 
Indonesia's response to challenging economic conditions in both 2008 
and 2009.  As a member of the G20, Indonesia has had an opportunity 
to work with international partners to coordinate responses to the 
global financial crisis.  The Minister expressed confidence that 
Indonesia will maintain economic growth greater than 3% in 2009. 
Based on current conditions, she considers the government's revised 
economic growth rate target of 4.5-5.5% attainable if the government 
succeeds in implementing timely counter-cyclical measures to boost 
domestic demand.  She expressed caution about the prospects for 
exports and investment in 2009, given continued declining commodity 
prices. 
 
¶3. (U) With President Yudhoyono charging his Cabinet to prepare for 
the worst, while hoping for the best, Sri Mulyani briefed on the 
government's proposal to increase the budget deficit to 2.5% of GDP 
(IDR 132 trillion, equivalent to about USD 11.75 billion), up from a 
planned deficit of 1% of GDP (IDR 51 trillion).  She said the 
additional proposed deficit spending in 2009 reflected both 
anticipated declining revenues and the need of the government to 
spend more to counter slumping global demand. 
 
Highlighting Record of Strong Economic Performance and Benefits of 
Reforms 
- - - - - - - - - - 
 
¶4. (U) While acknowledging that the government is still trying to 
measure the depth and duration of the impact of the global financial 
crisis on the Indonesian economy and to manage those impacts, Sri 
Mulyani highlighted the government's strong economic performance and 
reform efforts.  In response to those who complain that Indonesia 
has yet to match pre-Reformasi growth rates, Sri Mulyani cited the 
current administration's record of economic growth exceeding 6% for 
the past two years and said Indonesia could enjoy strong economic 
growth along with freedom and democracy.  She expressed particular 
pride in the results of continuing tax reform, citing Indonesia's 
more than 3 million new taxpayers in 2008 and state revenues 
exceeding the 2008 budget target by more than IDR 80 trillion.  An 
appreciative audience of key business leaders expressed strong 
support for the Minister's role in these achievements. 
 
HUME