JAKARTA – Asian Development Bank (ADB) made revision on the target of Republic of Indonesia or RI’s economic growth in this year and the next year.
In the recent published Asian Development Outlook (ADO), ADB mentioned that Indonesia’e economy will grow by 5% and 5.1% in 2016 and 2017, respectively.
In a publication in March 2016. ADB projected that Indonesia’s economy will grow by 5.2% and 5.5% in 2016 and 2017, respectively.
ADB Director to Indonesia Steven Tabor said that the cuts in government expenditures have affected to ADB’s infrastructure projects. This year, the government has cut the capital expenditure twice, each for IDR50 trillion and IDR137 trillion. “A part of our infrastructure projects are delayed until next year”, Steven said.
Steven added that ADB revised down the prediction of Indonesia’s economic growth due to the slow realization of investment. In this case, investors prefer to adapt wait and see stance over the implementation of government’s reform policy before conducting investment.
The slower economic growth was also caused by the low of commodities prices, such as coal, gold, and palm oil, due to the lower global demands over the commodities. In the report, ADB indicates the increase in China’s import rate. However, the increase may not have significant effect to Indonesia’s export.
Deputy Head of Representatives of ADB to Indonesia Sona Shrestha added that the revision was also driven by the sluggish work force market. This condition has deteriorated consumers’ confidence.
According to ADB, number of work forces in February 2016 decreased by 0.2% on year on year (yoy) basis, despite the number of jobs in village increased by 2% in the same period.
ADB predicts that private consumption will still be major driver of economic growth in the second semester of 2016. In this case, the increase in number of minimum wage and non-taxable income, as well as the low inflation rate may encourage household consumption.
Economist at Samuel Aset Management Lana Soelistianingsih said that ADB’s prediction is higher than other international financial institution’s prediction. Lana predicts that Indonesia’s economy will grow at around 4.9%-5%.
Aside of ADB, BI (the Central Bank) has revised down the economic growth prediction from 5.1% to 5%. Indonesian government has also projected that Indonesia’s economy will grow at 5%-5.1%.
Economist at Standard Chartered Aldian Taloputra said that Indonesia’s export performance starts improving, while BI’s relaxing monetary policy has encouraged private investment. “Hope those may cover the effects of government’s budget cut," Aldian said.
(MUHAMMAD FARID/Translator)
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