Indonesian president urges new cabinet to spend to support growth

JAKARTA - Indonesian President Joko Widodo on Wednesday urged ministers in his newly reshuffled cabinet to spend their budgets to revive slowing growth in Southeast Asia's largest economy.

Many economists say growth this year will miss the government target of 5.0 per cent to 5.2 per cent, as many of Widodo's ambitious plans to improve infrastructure have been entangled in red tape.

In the six months through June, Widodo's administration has only disbursed 10 per cent of the funds earmarked for investment, while spending less than 40 per cent of its budget.

"I've been saying this since January, because it relates to economic growth," Widodo said. "So, once again, concentrate on budget absorption, because the money is there!"

Indonesia's gross domestic product (GDP) grew about 4.7 per cent in each of the first two quarters, its slowest pace since 2009, amid waning domestic demand and weakening prices for coal and commodities, key earners for the country.

Eight months into the fiscal year, capital spending had only reached 20 per cent of the budgeted amount, Widodo said.

"It's already mid-August and it's still only 20 per cent," he added.

Widodo on Friday unveiled a proposed 2016 budget built on assumptions that economic growth will reach 5.5 per cent next year.

The state budget and regional government budgets had a multiplier effect on the economy, said Bahlil Lahadalia, chairman of an association of young entrepreneurs.

"They are literally the food on people's tables," Lahadalia added. "With only 20 per cent of the budget disbursed, the government is making them starve."