World Bank: Indonesia's investment Spending slowed

Giri Prakosa

Sindonews.com -the World Bank praised Indonesia's economic growth rate of a firm during 2012, where the gross domestic product (GDP) reached 6.2 percent or slightly decreased from 2011, reaching 6.5 percent.

But looking ahead, according to the World Bank, there are pressures that are likely to affect the achievement of economic loss in 2013.

"The sources of pressure on the economy slowing the pace of investment, including the potential implications of slowing sales growth in nominal GDP and real, trends in the external balance, the continued burden of FUEL subsidies, and reduced the rate of poverty reduction slowed," wrote the World Bank in its quarterly report released today, Monday (18/3/2013).

According to the World Bank, the greatest risk of short term growth can come from investing in the country. Investment spending has slowed down, especially in the field of solid capital resources (capital intensive sectors).

In addition, the growth of fixed investment (fixed investment) down to 7.3 percent in the final quarter of the year 2012, down from 12.5 percent in the second quarter, and the import of capital goods has been weakened.

Citing data on value added in trade from the OECD and the WTO, the World Bank expressed the importance of input (input) in the manufacturing export import Indonesia, and efforts to improve the integration of Indonesia in the eyes of international production chains, and to improve export performance by facilitating the development of export-related services.

"Investing is also very necessary for the infrastructure that leads to barriers and high logistics costs. Infrastructure investments remain in the range of 3 percent to 4 percent of GDP, compared to about 7 percent recorded before the crisis in Asia, "wrote the report.

According to the World Bank, infrastructure challenges for most cities and towns in Indonesia have been quite severe, with more than half of Indonesia's population lived in urban areas, and the rate of urbanization which remains high.

"An increase in the number, quality and efficiency of the infrastructure investments can help open the economic benefits of urban agglomeration and supports quality public service, especially in medium-sized cities that lag behind the development of smaller urban centres and huge cities (" mega cities ")," wrote the report.

(gpr)

Finance; Investment; Business; Economics

Finance; Investment; Business; Economics

Draghi prefers to cut spending and not raising taxes to reduce deficit

Draghi, at the beginning of his speech to the European Parliament. / THIERRY CHARLIER (AFP)

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The President of the ECB, Mario Draghi, has warned Monday of the risk that would be to progress now "weakening" the fiscal adjustment in the eurozone and stressed that the answer to the problems is not postponing fiscal consolidation, but mitigate the effects of contraction generated by short-term. He has also advocated act more on the side of spending, cutting games, than the the revenue, where the main route of response is the of raising taxes.

"We are very aware of the situation in which members of the eurozone are currently many States," said Draghi before the Committee on economic and Monetary Affairs of the Parliament European. In this sense, has reiterated to fiscal consolidation must be individually designed for each Member of the eurozone, because there is no general recipe that applies to all, since the pace and speed of adjustment depends also on the initial level of debt of countries which depart.

That Yes, has warned against any minimum weakness by lifting the foot off the accelerator settings. "If fiscal consolidation is weakened, run the risk of losing some of the benefits that have been already made many sacrifices," said Draghi after reiterating that "fiscal consolidation, particularly in countries with a high level of debt, is inevitable".

Now, if this effort compounded the contractive phase of economies, Draghi has been in favor of acting. To do this, however, you must be "an appropriate design of fiscal consolidation, based more on cuts in spending rather than tax hikes", explained the President of the ECB at the time which reminded that taxes in the euro area are already "very high".

The "quick and efficient implementation of structural in product markets and labour reforms" is also key, he has argued, because they will thus increase exports. "There will be at least one component of GDP that is not reduced because the consumption and investment fall in the short term. This way at least improvement in the current account will be", allowing you to mitigate the contractive effects in the short term, he added.

Another aspect is detailed budget plans in the medium term, as they help to generate confidence in the markets, he said. "Detail is crucial, because plans must be credible to reassure the markets and this has to have details," added Draghi.

Finance; Economic; Business

Finance; Economic; Business

Cuts to hurt domestic security spending

Homeland Security Secretary Janet Napolitano sent a letter to lawmakers highlight how imminent spending cuts would affect her agency is able to carry out its functions, including border security.

"Disqualification will roll back border security, increased waiting times at ports of entry and airports in the nation, affecting air and maritime safety and security, vital infrastructure vulnerable to attacks, impede disaster response time. By and large scale back infrastructure cyber security, "Homeland Security Secretary Janet Napolitano wrote in a letter to members of Parliament.

Will also have a significant part of the front line law enforcement personnel management should be given for up to 14 days, she said.

Sikoister-a series of blunt, automatic funding cuts across much of the federal budget beginning in March--was supposed to come into effect. Instead, the threat it was supposed to motivate legislators find a smarter way to reduce the deficit over the next decade.

But there is a deep divide between the political parties in Washington about how to replace sikoister. Democrats want to replace it with a combination of tax increases and more stepwise; spending cuts Republicans want to replace just cut spending.

With very little time remaining, chances are high that funding cuts will go into effect, at least temporarily.

In detail the White House last week, the impact of spending cuts on the rest of the Government. He warned sikoister ultimate cut 9% of its funding from non-defense programs and 13 per cent of defence programmes.

Napolitano, along with Secretary of education Arne Duncan and housing Secretary Shaun Donovan, will testify on Thursday before the Senate Appropriations Committee "after stepping down from their agencies.

-Jim Acosta SI contributed to this report.

First published: 13 February 2013: 6: 11 pm et

Finance; Investment; Business; Economics

Finance; Investment; Business; Economics

Big taxes + big spending cuts = California budget surplus

AppId is over the quota
AppId is over the quota

Big spending cuts and a tax increase on the wealthy are helping California balance its books.

After multi-billion dollar shortfalls in recent years, the state's budget has finally straightened out. California expects to take in $2.4 billion more in revenue than it will spend this fiscal year, which ends June 30. After paying off a shortfall from last year and setting aside funds for upcoming obligations, it's on track to end the year with a $36 million surplus.

If the legislature approves Governor Jerry Brown's 2013-14 budget proposal, California should have enough money next year to increase funding for education and pay down debt, while setting aside $1 billion in a reserve fund.

"For the next four years, we're talking about a balanced budget. We're talking about living within our means," Brown said last month when he unveiled his budget. "This is new. This is a breakthrough."

What prompted the turnaround?

Three things: Major spending cuts over the last few years, big tax increases approved by voters in November and general improvement in the economy.

When Brown took office in 2011, the state faced a $26.6 billion budget gap. To close it, the state slashed spending for schools, the correctional system, health and human services and higher education.

California's general fund spending dropped to $93 billion this fiscal year, down from a peak of $103 billion in 2007-08. The state workforce contracted by more than 30,000 positions. Spending on schools plummeted to $47.3 billion last year, down from $56.6 billion four years earlier. The state limited the time adults could receive welfare cash assistance to as little as 24 months, down from 60 months.

The new budget for next year increases spending in certain areas, particularly education. The general fund is projected to grow by 5%, to $97.7 billion.

"It's been a long time since California has had a budget that didn't consider significant cuts in health, social services and other programs," said Jason Sisney, director of state finance for the Legislative Analyst's Office. "We have a relative degree of stability for the first time in half a decade."

Another major contributor is the state's new revenue stream.

California is on track to take in $95.4 billion this year, including nearly $6 billion from the passage of major, temporary tax increases in November. Millionaires will pay a top rate of 13.3% through 2018, while the state's sales tax rate will be a quarter point higher through 2016. Corporations will also pay higher levies.

Meanwhile, California's finances are improving as the general economy gains ground. The state has been creating jobs faster than the nation for a year -- its unemployment rate is now around 9.8%, down from 12.4% in October 2010 -- and its housing market is rebounding more swiftly, according to Gabriel Petek, analyst with Standard & Poor's. The rating agency rewarded the state by upgrading its credit rating last week. (It is now the second lowest-rated state, behind Illinois.)

Don't break out the bubbly just yet, though. California's new balancing act is as fragile as a Jenga tower.

The state is still highly dependent on income tax revenue from the wealthy, a notoriously fickle source. The tax increases prompted grumblings from wealthy residents like golf star Phil Mickelson, and spurred other states, such as Texas, to encourage businesses to move.

Related: Texas to California businesses: Move here!

"Millionaires don't make a million dollars every year," said Mike Genest, a consultant and former state finance director under Republican Governor Arnold Schwarzenegger. "The idea that we have emerged from our historic budget shortfalls in a sustainable way is very questionable."

All of the state's budget figures and forecasts for the year are still guesswork. California will have a better idea of exactly how much revenue it will collect this year -- and whether it will still have a surplus -- when it issues its revised forecast in May.

Another risk is that lawmakers will want to restore many of the services and funding that were slashed during the Great Recession and its brutal aftermath. Brown has pledged continued fiscal constraint, but that can be difficult to accomplish politically.

If legislators don't approve certain measures in Brown's budget proposal, such as the continuation of some fees and taxes, the state could dip back into the red at the end of its 2013-14 fiscal year. It would run a tiny $7 million deficit, according to projections from Brown's finance office.

And like many states, California has yet to deal with its longer-term problems. The big whammies there include unfunded liabilities associated with the teachers' retirement system and state retiree health benefits.

California officials will also have to keep a close eye on decisions emanating from Washington, D.C. Federal spending cuts could slow California's economy.

"There are still risks out there that are out of the state's control," said H.D. Palmer, a spokesman for the state Department of Finance.

Federal policy makers are now facing many of the same issues -- spending cuts, tax increases, safety net reforms -- that plagued California for years. Perhaps they can take a lesson about making those tough choices -- and the payoff you get when you do.

Are you looking to leave California because of the recent tax increase? If so, email tami.luhby@turner.com. You could be profiled in an upcoming story. First Published: February 7, 2013: 5:10 AM ET

Finance; Investment; Business; Economics

Finance; Investment; Business; Economics