Growth. Government’s target of 5.9 percent growth (revised down from 6.2 percent) this year is unlikely. We maintain our forecast of 5.4-5.7 percent. As for point estimate, it is close to 5.5 percent.
Employment. Unemployment increases. In February 2006 the rate of open unemployment is 10.4 percent, as opposed to 10.3 percent in February 2005. Labor force is close to 160 million. Fiscal expansion has not been helpful for job creation, as promised. SBY has been promoting his “New Deal” program, yet it is unclear.
Exchange rate and stock index.
Export. Export value increases. But the figure is illusive. That is, the main drivers of the “increase” are mining and agriculture which in turn benefit from higher international prices.
Expected policies. We still expect fiscal stimulus and stabilizing monetary policy. However, the government’s inability to spend is quite worrying.Fingers crossed.