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Indonesia's economy is to grow by 5 per cent in 2010, while the budget deficit is predicted to be 1.6 per cent of the gross domestic product (GDP), down from this year's 2.5 per cent, according to a draft budget unveiled Monday. President Susilo Bambang Yudhoyono said in an address to the House of Representatives the budget deficit in 2010 is anticipated to be 98 trillion rupiah (9.9 billion dollars), or 1.6 per cent of the GDP, as the government plans to continue fiscal stimulus to help the economy recover.

Revenues are to increase by 38.8 trillion rupiah to 911.5 trillion rupiah from the current fiscal year ending December 31, while expenditures are forecast at 1,009.5 trillion rupiah, up 3.8 trillion rupiah.

"The 1.6-per-cent GDP deficit in the bill of the state budget 2010 is appropriate for our economy which remains in the recovery stage from the impact of the global crisis," Yudhoyono said.

Deficit was adjusted to 2.5 per cent of the GDP in the revised 2009 budget.

While the global economy in 2010 is predicted to enter a recovery phase, Yudhoyono warned that this did not mean Indonesia's economic development would be free from challenges.

"Indonesia certainly cannot disengage itself from the impact of the downturn of global economic activities," Yudhoyono said. "Nevertheless, due to rapid and appropriate action, Indonesia was relatively speaking far better off than other countries."

The government proposed to spend 61.2 trillion rupiah in 2010 to boost Indonesia's economy, slightly down from the 70-trillion-rupiah stimulus package in the 2009 budget.

In his speech, Yudhoyono, who won a second five-year term in last month's presidential election with than 60 per cent of the popular vote, said the economy would grow 5 per cent, "or even more" next year, and "even faster" in subsequent years.

Indonesia's economy grew at the fastest pace in South-East Asia in the first quarter, expanding 4.4 per cent from a year earlier.

In an attempt to boost investment in the country, Indonesia is to further intensify law enforcement, harmonizeinvestment laws and ameliorate the bureaucracy towards better public services, the president said.

Inflation is predicted to be around 5 per cent in 2010, he said.

The 2010 proposed budget was drafted based on an average dollar exchange rate of 10,000 rupiah to the dollar and a daily crude oil output 965,000 barrels per day, with oil prices averaging 60 dollars per barrel.

In an attempt to protect the lower segment of society, the government plans to raise wages for government workers by an average of 5 per cent and spend a total of 144.4 trillion rupiah on subsidies for energy, food and fertilizers, he said.