Bank Indonesia, the central bank of Indonesia, expects the nation's gross domestic product (GDP) to accelerate modestly in the remainder of the year after having recorded slightly disappointing 5.01 percent year-on-year (y/y) growth in both the first and second quarter of 2017.
On Friday (15/09), Dody Budi Waluyo, Bank Indonesia's Executive Director of Economic and Monetary Policy, said Indonesia's lender of last resort expects the nation's economic growth to accelerate slightly to the range of 5.1 - 5.2 percent (y/y) in the third quarter of 2017.
Modest acceleration is expected to come on the back of improving private consumption in Southeast Asia's largest economy. Waluyo added that Indonesia's August 2017 retail data (collected through a Bank Indonesia survey) point at improving household consumption.
However, this latest outlook implies it will be highly unlikely that full-year 2017 economic growth is to meet the government's 5.2 percent (y/y) GDP growth target (as set in the Revised 2017 State Budget).
A major contributor to Indonesia's disappointing economic growth in the first half of 2017 was bleak household consumption. However, in August the central bank, again, cut its benchmark interest rate. This time by 25 basis points to 4.50 percent. According to Waluyo it will take about two or three quarters for the positive impact of lower interest rates to materialize. Thus, too late to impact significantly on economic growth in 2017.
Last month Bank Indonesia released a statement after its monthly policy decision in which it kept its economic growth forecast at the range of 5.0 - 5.4 percent (y/y) for 2017 and 5.1 -5.5 percent (y/y) for 2018. Bank Indonesia is scheduled to review its monetary policy on 20-22 September 2017.
Indonesia's Quarterly GDP Growth 2009-2017 (annual % change):
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Source: Statistics Indonesia (BPS)