JAKARTA. Bank Indonesia (BI) forecasts that the domestic economy will expand by 5.1 or 5.2 percent for the first two quarters of the year, thanks to the government’s hefty spending and inflow of private investment.
According to the central bank’s calculation, the country’s gross domestic product (GDP) will jump by 5.1 percent in the first quarter of the year from 5.04 percent in the fourth quarter of 2015 and then perch at 5.2 percent for the next three months.
Both projections are higher than what the country posted a year ago: 4.73 percent in the first quarter of 2015 and 4.66 percent in the second quarter.
By year-end, the Indonesian economy is expected to grow by between 5.2 percent and 5.6 percent.
BI Governor Agus Martowardojo said Tuesday that the first half growth would be mainly supported by the government’s capital spending, followed by private investment in the second half.
“The private sector has been affected by declining commodity prices and a lingering global economic slowdown, but the government’s economic reforms have created momentum,” he said on the sidelines of an investment forum organized by Euromoney Conferences.
The government has vowed to speed up its budget disbursement this year so that the funds will not pile up in the last quarter as in previous years.
Finance Minister Bambang Brodjonegoro said that such prompt disbursement was now possible, thanks to pre-funding activities last December that generated fresh funds for various projects.
“We want to see more equal disbursement throughout the quarters,” he said.
President Joko “Jokowi” Widodo’s administration has allocated Rp 1.32 quadrillion (US$100.32 billion) from the state budget this year as the central government’s spending. About 25 percent — Rp 325.4 trillion — has been earmarked for goods expenditure and 15 percent — equal to Rp 201.6 trillion — for capital expenditure.
By January, it had only spent a fraction of those figures, with expenditures on goods standing at Rp 1.1 trillion and capital expenditure at Rp 1.5 trillion.
Efforts to speed up state budget disbursement are expected to jump-start economic activities that have been sluggish and revive domestic consumption and overall confidence.
Data from the Central Statistics Agency (BPS) show that investments surged by 5.07 percent year-on-year (yoy) in 2015 from 4.12 percent in 2014, while domestic consumption fell to 4.96 percent yoy from 5.14 percent.
Meanwhile, a new report by Deutsche Bank emphasized Indonesia’s positive outlook, saying that it seemed to be the most resilient country among other commodity producing emerging market (EM) economies.
“The public, corporate and household sectors are not burdened by as much leverage as their counterparts in most other EM economies, which leaves open the possibility of a healthy cycle of credit creation and capacity expansion ahead.”
It also lauded President Jokowi, whom it labeled as becoming more secure and reform oriented.
However, it warned that overambitious goals to lower the structure of interest rates could create distortions in the financial system, leading to excessive and unproductive lending.
According to the report, the country has gone through a fairly painful adjustment in recent years and is in a strong position to launch a sustained recovery.
“There is no need to add fuel to the fire; as inflation comes down, rates will follow,” it said. (Tassia Sipahutar)
