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Government Urged to Prepare for ‘Dangerous’ Economic Times Ahead
August 14, 2011

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As World Bank chief Robert Zoellick warned on Saturday of a “new and more dangerous” time in the global economy, Indonesian lawmakers and local analysts said the country should set out a 2012 budget that took a possible downturn into account.

Zoellick said the euro zone’s sovereign debt issues were more troubling than the “medium and long-term” problems that saw the US credit rating downgraded by Standard & Poor’s last week, sending global markets into a panic.

“We are in the early moments of a new and different storm, it’s not the same as 2008,” Zoellick said, referring to the global financial crisis three years ago.

“In the past couple of weeks, the world has moved from a troubled multi-speed recovery — with emerging markets and a few economies like Australia having good growth, and developed markets struggling — to a new and more dangerous phase,” he told the Weekend Australian newspaper.

Indonesian officials, meanwhile, expressed concerns that the nation’s economy could still be at risk if the United States and European Union slipped back into recession, even if domestic growth remained strong.

Harry Azhar Azis, deputy chairman of House of Representatives Commission XI, which oversees financial affairs, said on Sunday that a downturn should still be anticipated and reflected in next year’s budget.

“The key is to maintain our consumer spending, the key driver of the economy,” he said, adding that the government should also channel hot money inflows into physical investments so that it could stimulate the economy.

President Susilo Bambang Yudhoyono is scheduled to present the draft 2012 state budget to the House on Tuesday.

Markets swung wildly last week on rumors France might be next in a debt crisis that started in Greece. There are also fears Spain or Italy might default, sparking a breakup of the 17-nation euro zone. Investors are now questioning whether France and Germany, the zone’s two largest economies, can continue to underwrite other states’ debts without losing their own top credit ratings.

Under pressure to calm jittery markets, Europe is pushing through measures agreed to in Brussels last month to rescue Greece and the currency.

In Asia — to which power, influence and weight was shifting “very fast by historical standards,” according to Zoellick — economic ministers nevertheless remained cautious.

On Saturday, Southeast Asian officials predicted a slowdown in regional growth amid the troubles in Europe and the United States. Meeting in Indonesia, they predicted Asean’s 7.5 percent growth last year could slip to below 6 percent this year.

Fauzi Ichsan, an economist at Standard Chartered Bank in Jakarta, said on Friday that Indonesia could grow 6.5 percent this year and 7 percent in 2012.

AFP, Antara, JG