Near Term Budget Concerns Do Not Alter Long Term Outlook

We have revised up Indonesia's budget deficit forecast for 2011 from 1.4% of GDP to 1.8% of GDP owing primarily to an increase in fuel subsidy costs, which continue to make up a substantial proportion on the Indonesian government's outlays, tying up much needed funds for infrastructure developments. We remain confident, though, that with the support of public private partnerships (PPPs), fiscal policy will be conducive to infrastructure growth over the coming years, notwithstanding the risks.

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