The central bank of Indonesia cut its outlook for Indonesia's economic growth in the first quarter of 2017. Earlier, the lender of last resort estimated Indonesia's Q1-2017 gross domestic product (GDP) at 5.05 percent year-on-year (y/y). Although the new growth projection has not been unveiled yet, Bank Indonesia Governor Agus Martowardojo said it sees GDP growth now below 5.05 percent (y/y) in the first quarter of the year.
Reason for this downward revision is that government consumption remains bleak. Government spending is one of the pillars of support for macroeconomic growth. However, so far in Q1-2017 public spending has not lived up to expectation (a normal phenomenon at the year-start amid fiscal consolidation after closing fiscal year 2016).
Indonesia's export performance in the first quarter of 2017, on the other hand, is expected to improve in line with higher commodity prices such as coal and crude palm oil (CPO).
Martowardojo added that Bank Indonesia is still finalizing the revision for its Q1-2017 growth projection and will release a new figure (below 5.05 percent) soon. Meanwhile, regarding full-year 2017, Bank Indonesia still expects GDP growth to fall within the range of 5.0 - 5.4 percent (y/y).
Amalia Adininggar, Director for Macro Policies and Analysis at Indonesia's National Development Planning Agency's (Bappenas), is optimistic growth will touch 5.3 - 5.5 percent (y/y) this year although there remain plenty of global challenges that can undermine this growth pace (for example looming higher US interest rates, Donald Trump's trade policies but also administered price adjustments in Indonesia that are expected to push inflation to about 4 percent y/y).
The Indonesian government is optimistic that in 2018 economic growth can touch slightly above 6 percent (y/y) supported by a more stable global economy and by Indonesia becoming host of the 2018 Asian Games and annual IMF meeting. These events could boost investment in Indonesia.
Indonesian Deputy Finance Minister Mardiasmo emphasized that tax revenue needs to be optimized in order to finance government spending. About 86 percent of government spending is financed through tax revenue collection.
Indonesia's Quarterly GDP Growth 2009-2016 (annual % change):
|Year|| Quarter I
||Quarter II||Quarter III||Quarter IV||Full-Year|
Source: Statistics Indonesia (BPS)