Bank Indonesia convinced economy will grow based on its prediction

09 June, 2015 | Source: ANTARA NEWS

Jakarta (ANTARA News) - Although the economic growth is lower than the first-quarter forecast for 2015, Indonesias central bank, Bank Indonesia (BI) is convinced that the countrys economy will grow based on its estimates this year.

The BI still maintains its projection that the Indonesian economy in 2015 will at least reach the lower limit of its estimate at 5.4 percent.

The BI has projected that the countrys economy this year will grow at a rate between 5.4 percent and 5.8 percent. However, the economic growth in the first quarter was recorded at only 4.71 percent.

"BI is of the viewpoint that the countrys economic growth this year will at least be at the lower limit of its prediction at 5.4 percent. It will be at the lower limit of its 5.4-5.8 percent predication. However, BI will wait and watch whether it needs to make a review in the second quarter of 2015," BI Governor Agus D.W. Martowardojo remarked last week, (May 20).

The governor expressed optimism that the economy in the second quarter will grow faster. Thus, in 2016, Indonesias economic performance will be better as compared to 2015 and will record a growth in a range between 5-6 percent, according to Martowardojo.

"We predict that in 2016, we will not exceed the 6 percent limit. So, we estimate that Indonesias economic growth would be in a range of 5-6 percent in 2016," Martowardojo added.

With regard to the economic growth this year, economic observer Thomas Ola Langoday from the University of Widya Mandira (Unwira) Kupang, East Nusa Tenggara, explained that there was no cause for major concern as the growth is expected to be stronger during the rest of the year, and the growth could reach well above 5.0 percent for the entire year.

"There is no need to harbor much concern as the economic growth at the end of 2015 could still reach 5.0 percent in accordance with the BIs prediction, although the economy in the first quarter only grew 4.6 percent," the academician remarked.

He forecast that the economic growth until the end of the year could reach 5.3 percent.

"As the government is accelerating the development of infrastructure projects in the second quarter of this year, the economy will grow faster to exceed the 5 percent level," Langoday stressed.

In the second quarter, the government will start disbursing funds for infrastructure development. Finance Minister Bambang Brodjonegoro noted that so far the absorption of budget for infrastructure had been low as the Revised 2015 State Budget (APBN-P) was endorsed by the House only in February, 2015.

The government is expected to commence the disbursement of budget for infrastructure development in May. "We hope that in May, the Ministry of Public Works and Housing, the Ministry of Agriculture and other ministries/state institutions will realize their infrastructure expenditure," affirmed Finance Minister Brodjonegoro.

It was believed that the economic slowdown in the past several months was partly caused by the low absorption of infrastructure budget. Until April 27, the absorption of infrastructure budget only reached 2.5 percent, or Rp7.3 trillion of the total budget worth Rp290.3 trillion. As the government has begun disbursing funds for development, the economic growth is expected to increase.

Thus, the economy in the second quarter is expected to rebound from the slow growth in the first half of the first quarter.

The Indonesian economy in the first quarter of 2015 grew by 4.71 percent year-on-year, down 0.18 percent from 5.14 percent recorded in the same period last year. This is the lowest per quarter growth recorded since 2009.

Therefore, Longaday claimed that the BIs prediction at 5.3-5.4 percent is still realistic.

"The projection is realistic taking into account the current conditions," Langoday noted on Monday (May 25).

He explained that global pressure has also caused a slowdown in the countrys economic growth since last year.

The economic observer attributed the slow growth in the initial months of 2015 to a delay in the rice planting season and the falling prices of primary commodities.

The imports of basic materials, capital goods, and consumer goods had also dropped, thereby resulting in a slowdown in investment, he stated.

The government, therefore, needs to forestall the possibility of a continued decline in the consumption sector, which has been one of the key drivers of the countrys economic growth in the past years.

The decline in the imports of basic materials and capital goods may indicate a decline in the growth of the manufacturing sector when consumption is expected to increase during the Islamic fasting months and Idul Fitri.

According to BI Governor Martowardojo, the global economy has not yet fully recovered, but Indonesia is optimistic that the global economic conditions, particularly in countries that are Indonesias export destinations, would improve further and have a positive impact on the nations economic development.

"It is expected that the government spending and investment will be bigger while the global economy in Europe, the United States, and Japan will improve and help to improve the performance of our exports," Martowardojo affiremd.

Therefore, the BI has forecast that the country will record a stronger economic growth in the second half of the year after a slump in the initial four months.

In the meantime, Vice President Jusuf Kalla noted that Indonesia will perform better in the second quarter this year after posting disappointing results in the first quarter.

"In the second quarter, it will be better," he was quoted by asia.nikkei.com while convincing the representatives of Asian countries at a seminar held by Nikkei in Japan on Thursday, last week.

Kalla expressed optimism that the results of various infrastructure projects in the country will showcase this improvement.

 

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