Government of Indonesia Needs to Revise GDP Growth Target for 2014
The Indonesian government announced to revise its GDP growth target for 2014 after seeing the disappointing economic growth result in the first quarter of 2014. Last week, Statistics Indonesia (BPS) had announced that GDP growth in Q1-2014 only amounted to 5.21 percent, far below official growth targets as well as analysts' forecasts. Indonesia's slowing growth was caused by slowing exports, brought on by the slow global recovery, China's slowing economy and the temporary impact of the ban on exports of unprocessed minerals.
Currently, the government's GDP growth target for 2014 is still set between 5.8 and 6.0 percent, but few expect that this target can be met, despite the fact that household consumption and foreign and domestic investment continue to grow strongly. Indonesian Finance Minister Chatib Basri stated that the 2014 GDP growth target should be revised down to the range of 5.1 to 5.5 percent, which is in line with the growth targets of Indonesia's central bank (5.1 to 5.5 percent) and the Ministry of National Development Planning (5.3 to 5.5 percent).
The slowing economic growth in Southeast Asia's largest economy is also self-inflicted as the government and central bank decided to safeguard financial stability instead of seeking higher economic growth. By curbing domestic consumption, particularly imports, through the higher interest rate environment, tax measures and the subsidized fuel prices hike in June 2013, the government preferred to ease the current account deficit which stood at a record high in the second quarter of 2013 (at 4.4 percent of GDP) and puts great pressure on the rupiah exchange rate as well as on investors' confidence.
Indonesia's Quarterly GDP Growth 2009–2014 (annual % change):
|Year|| Quarter I
||Quarter II||Quarter III||Quarter IV|
Source: Statistics Indonesia (BPS)
Gross Domestic Product of Indonesia 2006-2013:
(in billion USD)
(annual percent change)
|GDP per Capita
Sources: World Bank, International Monetary Fund (IMF) and Statistics Indonesia (BPS)