Government to boost spending to help economy grow in Q2

ECONOMIC GROWTH - JAKARTA. The government has pledged to boost spending in the second quarter to significantly boost gross domestic product (GDP) growth.

Finance Minister Sri Mulyani Indrawati said on Thursday that in the first four months, government spending, which grew 11.8 percent year-on-year (yoy) to Rp 370 trillion (US$25.57 billion), was an important aspect in GDP growth.

Sri Mulyani said the government would continue to maximize spending in the second quarter, including through the disbursement of Rp 40 trillion (US$2.77 billion) for Idul Fitri and 13th month salaries as Idul Fitri bonuses for civil servants and other government employees.

The minister also said that up to April, the government had disbursed Rp 54 trillion in social assistance funds for low income families or 75.5 percent yoy growth.

Sri Mulyani estimated that the disbursement of social assistance funds had increased spending by 40 percent among the poorest households.

Sri Mulyani said the government would try to maintain the conducive investment climate by offering various fiscal incentives, including tax holidays and tax allowances, as well as the simplification of investment permit applications.

The minister said she was optimistic that this year's 5.3 percent growth target could be achieved if growth in second quarter could be maintained. “We have three quarters to keep the growth momentum,” she added.

Private lender Bank Permata economist Josua Pardede estimated that the economy would grow only 5.07 percent in the second quarter, supported by household spending. He also acknowledged that government spending was important to GDP growth.