Slow economic growth continues

JAKARTA. Results of some surveys conducted by BI (the Central Bank) show that national economic growth is unstable. The trends of economic growth are mostly driven by situational factors and purchasing power, not by an improvement on economic fundamentals.

The recent survey conducted by BI shows that as of August 2016 the Real Sales Index (indeks penjualan riil or IPR) had dropped by 6.5%, whereas the IPR only dropped by 0.7% in July 2016.

“The contraction was mainly caused by a 17.8% decrease in the sales of clothing products,” said Executive Director of Communication Department at BI Tirta Segara through written explanation to KONTAN on Tuesday (11/10).

After Ramadhan and Iedul Fitri festival in July 2016, consumers tended to control spending. This had led to sluggish retail business, and subsequently restrained the economic growth.

Another BI’s survey result shows that the consumer confidence level during January-September 2016 had dropped to the level of 110. However, the index indicates that national consumer confidence remains at high level.

Meanwhile, during the third quarter of 2016 enterprises tended to slow down. During the period, the weighted net balance dropped from the level of 18.40% in the second quarter to 13.2%. This indicates that the enterprises tended to hold business expansion.

Furthermore, the factory utilization rate dropped from 77.01% in the second quarter of 2016 to 76.21% in the third quarter of 2016. This had subsequently reduced company’s opportunity to generate profits.

Economist at Maybank Juniman said that the national slow economic growth was caused by the sluggish public purchasing power. Therefore, Juniman expects that government provides stimulus to jack up the purchasing power, for an example, by accelerating government expenditures, mainly in infrastructure sector.

Despite of the slow-down trend in domestic economy, Coordinating Minister for Economic Affairs Darmin Nasution is optimistic that the national economy may grow by 5.1%-5.2% in this year. Let alone, the prices of plantation and mining commodities have increased significantly.

Meanwhile, Senior Deputy of BI Mirza Adityaswara estimated that enterprises have show positive trend, thanks to relaxation of monetary policy. Therefore, Mirza is optimistic that the national economic growth will stand at the range of 5.1%-5.5%, with the middle point at 5.2%.

Vice Chairman of Indonesian Employers Association (Apindo) Suryadi Samita mentioned that the economy tended to slow because some entrepreneurs were focusing on participating in tax amnesty program.

Suryadi added that the entrepreneurs are likely to launch business expansion in 2017. (Translator: Muhammad Farid)