However, the commercial banks in Indonesia did not actively follow suit to cut their interest rates sharply, but only decrease the lending rate from 14.2 percent at the end of last year to 13.93 percent by the second week of March and the deposit rate from 8.75 percent to 8.32 percent, averagely.

Those are not enough, said analysts, adding that banks should keep lending rates below 13 percent to guarantee the economy running at the targeted 4.5 percent economic growth.

Therefore, many analysts and some officials in Indonesia had lost their confidence in the 4.5 percent economic growth this year, even Bank Indonesia on Thursday reduced its economic growth expectation to 4 percent.

However, President Susilo Bambang Yudhoyono seems to remain optimistically about the figure.

President Yudhoyono's confidence came from the government's plan of allocating a total 73.3 trillion rupiah (about US$6.1 billion) economic stimulus package.

"Let us make the economic stimulus a success because it is the state's and people's money and therefore it should be aimed at the right targets and used as much as possible to improve the people's welfare," said the president on March 7, adding that he hoped the funds would be channeled in April.

Of the package, 12.2 trillion rupiah (about US$1 billion) is for certain departments and ministries for infrastructure development across the country, which is 2 trillion rupiah more than the government's previous plan. The president said that infrastructure development would accelerate economic growth and enable maximum absorption of the work force amid the global financial crisis.

According to the previous plan, the 10.2 trillion rupiah (about US$850 million) could be used to create 1 million jobs directly and another 1 million to 2 million jobs indirectly. Besides, the money is also expected to bring 900,000 laid-off labor forces back to work.

Furthermore, the Indonesian government supports the proposal of raising fiscal stimulus to up to 2 percent of gross domestic product (GDP), particularly in 2010, at the meeting of G20 finance ministers and central bank governors in London.

"The fiscal stimulus for 2009 is not a problem. The problem is the fiscal stimulus for 2010 that needs to be raised," Head of the Fiscal Policy Board at the Indonesian Finance Ministry Anggito Abimanyu said on Monday.

Although he said the government has not decided about the fiscal stimulus for 2010, it is possible for the country to allocate stimulus funds worth about 105 trillion rupiah (about US$8.75 billion) next year.

In spite of the big meaning, the huge stimulus package will definitely increase the budget deficit of the Indonesian government.

According to the Financial Ministry's official director general of budgetary affairs Anny Ratnawati, the deficit will hit 137 trillion rupiah (about US$11.4 billion) this year, accounting for 2.6 percent of the country's GDP, as against last year's 51 trillion rupiah (about US$4.25 billion), or 1 percent of the GDP.

Ratnawati made that calculation when the stimulus package was still 71.3 trillion rupiah. With the additional 2 trillion rupiah, the country's budget deficit in 2009 will reach about 139 trillion rupiah (about US$11.6 billion).

In order to cover the deficit, Indonesia has prepared standby loans worth 44.5 trillion rupiah (about US$3.71 billion) and is still seeking loans from other countries and international financial institutions.

Bank Indonesia' Sarwono said on Thursday that the government was in a process to finalize a standby loan worth US$1 billion from the Islamic Development Bank (IDB) and the French government. He also said that the government had received US$5.5 billion (from Japan, Australia and the Asian Development Bank) before that.

On the other hand, according to the Investment Coordinating Board (BKPM), Indonesia is expected to maintain a 20 percent foreign direct investment growth this year, which is another positive signal to the country's economic growth.

BKPM chief Muhammad Lutfi said on February 24 that though investment growth was not too high this year compared with last year's 43.8 percent, in view of the current global economic crisis the country's economy was still better than that of other Asian countries.

(Xinhua News Agency March 20, 2009)