JAKARTA: Economic growth in the next year is estimated to be higher than projected by the government, if there are optimal fiscal supports for economic stimulus.Umar Juoro, an economist of Centre for Information and Development Studies, viewed that the growth target in 2012 within of 6.6%-6.7% is still too low. Even, the target, which had been discussed in a meeting of limited cabinet at Presidents office, isnt in accordance with an initial assumption in Draft of State Budget 2012 at 6.9%.The point should be focused on state expenditure. If the economic growth is lower than 7%, on the other word, the government isnt optimized in providing an economic stimulus, he told Bisnis yesterday.Considering quite great performance of export and investment as well as peoples consumption power, the economic growth in 2012 could stay at 7%, according to him.Government, as he added, tends to place Indonesias future economy on the hand of private sectors particularly in export, investment and consumption. As a matter of fact, if government maximizes its state spending in infrastructure development, it may effectively drives the economy.The similar notion also shared by economist at Econonit Advisory Group, Hendri Saparini that spotted governments flaw in functioning state budget as the economic stimulus.The economic potential can be higher than this. Yet, with the current government effort, the growth is somehow modest. It happens since government cannot exploit state budget and the current regulation to bolster infrastructure and secure energy supply, he said.According to him, the state budget is not specially designed to foster economy as the portion of capital expenditure is lower than the total state budget allocation. Moreover, the project realization funded by state budget is still low since most ministries/state institutions only focus on spending rather than maximizing the utilization."I disagree with the limited fiscal space because it could be enlarged by performing a non-priority spending moratorium to add capital expenditure," he said.From a cabinet meeting in Presidential Palace, the government said it will set a 2012 economic growth between 6.6% and 6.7%. The prediction is in line with the estimated increase in investment and exports in the country. In accordance with the regular agenda, the filing of the State Budget draft will be presented in Presidential speech on Augusts, 16 in the Parliament Building."Eventhough there are people who predict the economic growth in Indonesia will be around 7%, but we still set it within a range of 6.6% -6.7%," said Coordinating Minister of Economic Affairs Hatta Rajasa.He explained the outlook of economic growth is based on the increase in domestic investment and the value of exports. In addition, he said the current state budget has been expansive. Manufacturing industries, processing industries, and agriculture also have shown good progress.The potential economic growth is marked by more immense foreign investment in equity market, said PT Indo Premier Investment Management President Director John D. Item.Its normal if greater foreign funds come in because Indonesia currently has good prospect. As a developing country, we offer higher yield than other countries, he said.Still promisingThe value of stocks and bonds, as he added, in Indonesia is still attractive, so investors may get high yield. John expected that Indonesia in another five years would continue becoming a promising investment target for foreign investors.Foreign investment in Indonesian stock portfolio through yesterday was recorded at US$2.6 billion, increasing 120.5% from the same period last year.Based on Bisnis data, foreign fund to Indonesia is the second biggest in Asia Pacific, slightly smaller than Japan at US$42.22 billion.PT Mandiri Manajemen Investasis Director Wendy Isnandar stated there are 3 factors which trigger the flow of foreign funds into Indonesia.First, strong economic fundamental; second, a bright market condition with relatively healthy share valuation; third less prospective economic condition in other developing countries such as in India and China.Bank Indonesia previously warned the magnitude of capital inflows may potentially lead to rupiah appreciation and pose a dilemma for monetary authorities.On one hand, it is good for economic activities while on the other hand it may erode export competitiveness when capital reverse occurred.BI Monetary Policy and Economic Research Director Perry Warjiyo said that the government needs to communicate with the foreign investor about the needs for capital inflow in order to reduce the risk of sudden foreign capital outflow from financial market.The government also needs to utilize this fund for long-term by distributing it to real sector. It will monitor tightly over the outlooks to prevent fluctuation.Perry added that the higher integration of domestic economy with global economy along with the rush of capital inflows will likely increase the complexity of macroeconomic management particularly monetary policy and exchange rate.Thus, by remaining to adopt free foreign exchange regime, macro-prudential measures in capital flow are policy option that aimed to reduce excessive short-term capital flows. (18/Aprilian Hermawan/Gung Panggodo) (t01/t02/t03/t04/t05/t06/msw)

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