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ECONOMIC DIGEST

Low govt expenditures blocked 2016 economic growth

Tuesday, 07 February 2017 | Adinda Ade Mustami, Agus Triyono

JAKARTA. Indonesia’s economy in 2016 grew by 5.02% (yoy). This number is lower than the government’s target of the economic growth at 5.1%.

The economic growth in 2016 was mainly supported by household consumptions so that the realization of economic growth in 2016 was better than in 2014 and 2015 that stood at the levels of 4.79% (yoy) and 5.01% (yoy), respectively.

According to the National Statistic Agency (BPS), household consumptions grew by 5.01% (yoy) along the year of 2016 and have contributed to 56.5% of the Gross Domestic Product (GDP). "Those indicate some improvements. We expect that the economic grow will be more solid in the future,” said Head of BPS Suhariyanto, Monday (6/2).

The increase in household consumptions reflects on the increase in the increase in the sales of passenger cars, as well as the increase in consumption goods imports. However, according to BPS, the household consumptions rise in 2016 is still lower compared with the increase in the Non Profit Institutions Serving Households or LNPRT’s consumptions in the same year.

Along the year of 2016, LNPRT grew by 6.62% and became the component of GDP that recorded the highest growth rate.

According to Suhariyanto, the LNPRT’s growth rate was driven by the preparation of concurrent local elections, which will be held on 15 February 2017. In 2016, LNPRT’s growth rate dropped by 0.62% (yoy).

Has not been satisfactory

Suhariyanto added, the economic growth in 2016 was interrupted by the low government expenditure. This reflects on the negative growth of government consumption at 0.15% in 2015. The government expenditure reduction was triggered by the budget cuts. “This was mainly driven by the reduction in social aid expenditures,” he said.

The economic growth in the last year was also blocked by the realization of the investment growth, which was lower than the previous expectation. This reflects on the gross fixed capital formation (PMTB) growth at 4.48% (yoy), lower than the PMTB growth in 2015 at 5.01%.

Aside of the government expenditure and investment, export performance will also drop by 1.74% compared with 2015. The increase in commodities prices in the quarter IV-2016 still could not cover the export decline, which took place in the previous quarter. According to BPS, the performance of non-oil and gas exports dropped by 2.27%.

During the quarter IV-2016, the prices of oil and gas, as well as non-oil and gas commodities have increased in the global markets. This had affected to the performance of national export and import at the end of the year.

During the last three months of 2016, export grew by 8.93% (qtoq). However, the economic growth along quarter IV-2016 was only 4.94%.

Coordinating Minister of Economic Affairs Darmin Nasution has not yet satisfied with the last year’s achievement. According to Darmin, the economic growth in 2016 was lower than the government expectations.

The government expects that the domestic economy in the quarter IV-2016 would have grown by more than 4.94%. Therefore, the economy might have grown higher along the year of 2016.

Darmin’s discontent over the economic growth in 2016 is reasonable, since the government has set a 5.2% economic growth under 2016 State Budget.

(Muhammad Farid/Translator)

Reporter: Adinda Ade Mustami, Agus Triyono
Editor: Adi Wikanto
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