JAKARTA, June 9 (Xinhua) -- The Indonesian government is scaling back its annual economic growth target and drafting a stimulus plan to sustain exports and the rupiah against slowing demand and the flight of foreign funds, local media reported here on Saturday.
Finance Minister Agus Martowardojo said that the sovereign debt crises in the eurozone had already had a considerable effect on the local economy.
"We can see that the situation has begun to affect our trade balance. We are definitely preparing ourselves to manage the situation so that our second, third and fourth quarter economic growth will be enough to reach 6.5 percent as we planned," Agus said.
The finance minister also warned "However, if the global situation continues to stand as it is now, our actual economic growth could be between 0.1 percent and 0.2 percent lower than predicted."
Declining exports and faster import growth have become the government's number one concern, Agus said.
The Central Statistics Agency (BPS) reported last week that Indonesia's trade balance plunged into red in April for the first time in nearly two years due to an unexpected drop in exports.
The agency said that the nation's trade deficit was 641.1 million U.S. dollars in April after it recorded a surplus of 920 million U.S. dollars in January, 692.8 million dollars in February and 840 million dollars in March.
Agus said on Friday the government would offset pressure from weak exports by strengthening the domestic economy through an economic stimulus to boost consumption and create incentives to lure investments.
Household consumption and investment are the nation's largest economic drivers, contributing 54.6 percent to GDP last year, while exports accounted for 32 percent.
"We are planning to increase the non-taxable income level to 24 million rupiah (about 2,500 dollars) a year. This will push domestic economy," he said as quoted by the Jakarta Post. The level is currently set at 15.8 million rupiah..
Agus also said that the stimulus would cover accelerated infrastructure financing, although adding that the government had yet to establish a sufficient regulatory framework to accelerate infrastructure development.
"To finish the [regulations] will take time. As of now, we are preparing a tax holiday and tax allowance incentives that we hope will compensate for the slow development in other sectors," Agus said.