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Today's Headlines Government Spending

  • Weak Tax Collection, Indonesia Wants to Cut Government Spending

    Weak Tax Collection, Indonesia Wants to Cut Government Spending

    Due to weaker-than-expected revenue in 2016, the government of Indonesia has to cut government spending by IDR 50.6 trillion (approx. USD $3.8 billion) this year. Indonesian Finance Minister Bambang Brodjonegoro informed that the government is currently in the middle of discussing revisions of the 2016 State Budget (APBN 2016). Weaker-than-expected government revenue is primarily the cause of weaker-than-targeted tax revenue. The government will also revise its inflation, average rupiah rate, and average oil price targets. Despite the expected cut

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  • Lower Fuel Prices Would Improve Indonesia's Purchasing Power

    Lower Fuel Prices Would Improve Indonesia's Purchasing Power

    Indonesia's economic growth in the first quarter of 2016 could reach 5 percent (or more) year-on-year provided that the government manages to optimize spending on infrastructure projects and improve people's purchasing power. Large drops in domestic car and motorcycle sales so far this year show that Indonesia's purchasing power remains bleak. Other indicators - such as cement and retail sales - are also not too strong. Firmanzah, economist at the Paramadina University, said the 0.09 percent (m/m) deflation that occurred in February could be a sign of further weakening purchasing power.

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  • Indonesia in Need to Revise 2016 State Budget

    Indonesia in Need to Revise 2016 State Budget

    The Indonesian government will revise a number of macroeconomic assumptions set in the 2016 State Budget (APBN 2016). This budget was approved on 30 October 2015 and therefore has begun to fall out of tune with the current economic reality. Indonesian Finance Minister Bambang Brodjonegoro said the indicators that need some rethinking are the Indonesian crude oil price, inflation, and the rupiah exchange rate.

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  • Indonesia Stock Market: What are the Picks in 2016?

    Indonesia Stock Market: What are the Picks in 2016?

    Although challenges persist, Indonesia's benchmark stock index (Jakarta Composite Index) is estimated to rise in 2016, surpassing the level of 5,000 points. Last year the index fell 12.13 percent to close at 4,593.01 points. In particular Indonesia's infrastructure, banking, consumption, cement, property and construction sectors are expected to post a good performance this year on the back of accelerated domestic economic growth supported by government spending and the recent economic stimulus packages.

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  • Cement Industry Indonesia in 2016: Growth on Infrastructure Push

    Cement Industry Indonesia in 2016: Growth on Infrastructure Push

    The push for government-led infrastructure development across Indonesia, which started from mid-2015, is expected to cause rising cement sales in Indonesia in 2016. The Indonesian Cement Association (ASI) expects to see a 5 percentage point growth in Indonesian cement sales to 64.5 million tons this year (from an estimated 61.5 million tons in 2015). However, ASI Chairman Widodo Santoso emphasized that a delay in government spending could jeopardize achieving the sales projection.

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  • Government of Indonesia Preparing 2016 Infrastructure Projects

    Government of Indonesia Preparing 2016 Infrastructure Projects

    Although Indonesian President Joko 'Jokowi' Widodo pledged to boost infrastructure development across Indonesia, government spending on infrastructure projects was sluggish during his first year in office due to budgetary and organizational reforms (including cutting the energy subsidies). A positive sign, however, is that government spending on infrastructure development and the number of groundbreaking ceremonies for infrastructure projects rose in the second half of 2015 as reforms were completed.

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  • Asian Development Bank Cuts Forecast for Economic Growth Indonesia

    The Asian Development Bank (ADB) lowered its forecast for economic growth in Indonesia to 4.8 percent year-on-year (y/y) in 2015 and to 5.3 percent (y/y) in 2016 from previously 4.9 percent (y/y) and 5.4 percent (y/y), respectively. In its latest report on Indonesia, the ADB cited that problems related to budget disbursement and the nation’s weak export performance were the main factors to cut its growth projection for Indonesia - for both 2015 and 2016 - by 0.1 percentage point. In September 2015, the ADB had already cut its growth forecast for Indonesia on the back of negative effects of China’s economic slowdown.

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  • Budget Deficit of Indonesia Safe on non-Optimal Government Spending

    Budget Deficit of Indonesia Safe on non-Optimal Government Spending

    One advantage of Indonesia's non-optimal government spending is that it somewhat covers for the shortfall of tax revenue that is expected to occur in 2015. The shortfall in tax collection may reach up to IDR 250 trillion (approx. USD $18 billion) and this failure to meet the government's tax collection target in the 2015 State Budget was the reason behind the resignation of Sigit Priadi Pramudito as Director General of Indonesia's Tax Office. But with government spending estimated to reach only about 90 percent of this year's target, the budget deficit should not go beyond the 2.7 percent of gross domestic product (GDP) mark.

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  • Why the Indonesian Government Delayed Release of 7th Stimulus Package?

    Why the Indonesian Government Delayed Release of 7th Stimulus Package?

    Last week Indonesia delayed the release of the seventh economic stimulus package - a package that will focus on boosting the village economy - as the government still needs to implement several deregulations and debureaucratization in relation to its previous stimulus packages. Darmin Nasution, Indonesia's Chief Economics Minister, said it are the Ministry of Industry, the Ministry of Trade, and the Ministry of Energy and Mineral Resources that are still to implement deregulations before the seventh package can see daylight.

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  • Indonesia's 7th Economic Stimulus Package: Focus on the Village Economy

    Indonesia's 7th Economic Stimulus Package: Focus on the Village Economy

    The government of Indonesia is currently preparing the seventh economic policy package. Through this new package it aims to boost people's purchasing power by focusing on the village economy (ekonomi desa). The package will have two main centers of focus: (1) making the use of village funds - disbursed by the central government - more effective, and (2) improving logistics at the village level. Edy Putra Irawadi, Indonesian Deputy Minister for Industry and Trade, said these new policies will boost people's purchasing power, especially at the village level.

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Latest Columns Government Spending

  • World Bank Releases Indonesia Economic Quarterly "Reforming amid Uncertainty"

    World Bank Releases Indonesia Economic Quarterly "Reforming amid Uncertainty"

    Today, the World Bank released the latest edition of its flagship publication Indonesia Economic Quarterly, entitled "Reforming amid Uncertainty". In this edition the Washington-based institution states that global conditions remain unfavorable despite financial markets having stabilized since October. Meanwhile, the country was negatively affected by severe man-made forest fires and toxic haze which cost Indonesia an estimated IDR 221 trillion (USD $16 billion or 1.9 percent of the country's gross domestic product) in five months.

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  • Bank Central Asia (BCA) to See Slower Credit Growth than State Banks

    Bank Central Asia (BCA) to See Slower Credit Growth than State Banks

    Bank Central Asia (BCA), one of the leading commercial banks in Indonesia, is estimated to continue posting growing net profit and rising credit growth in the years ahead despite the persistently sluggish domestic economy. However, contrary to the state-controlled banks - such as Bank Mandiri, Bank Negara Indonesia (BNI) and Bank Rakyat Indonesia (BRI) - BCA will most likely not see double-digit credit growth in the near future as BCA's customers mostly originate from the private sector. The state-controlled banks, on the other hand, have the advantage of being involved in the government's push for infrastructure development and government spending.

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  • Analyst Opinion: Indonesia Should Focus on Boosting Purchasing Power

    Analyst Opinion: Indonesia Should Focus on Boosting Purchasing Power

    An Indonesian analyst says the Indonesian government needs to increase efforts to boost people's purchasing power in order to achieve the government's economic growth target of 5.3 percent in 2016. Household consumption in Indonesia accounts for about 55 percent of the nation's total gross domestic product (GDP) growth. As such, if purchasing power continues to weaken, then the economic slowdown returns. The analyst suggests the government should consider to cut personal and corporate income taxes, delay the electricity tariff hike for 900 VA households, and lower fuel prices.

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  • Infrastructure Development Indonesia: Gaining Momentum in 2016

    Infrastructure Development Indonesia: Gaining Momentum in 2016

    After having grown rapidly in the years 2010-2013, infrastructure development in Indonesia lost its momentum in 2014. This was due to limited available government funds, uncertainty caused by the legislative and presidential elections, and the nation's slowing economic growth. After Joko Widodo became Indonesia's seventh president in October 2014, it was expected that infrastructure development would revive. However, it didn't. But Widodo made one important move by seriously reducing energy subsidies, hence making more funds available for infrastructure development.

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  • Economy of Indonesia: Economic Growth at 4.73% y/y in Q3-2015 - Analysis

    Economy of Indonesia: Economic Growth at 4.73% y/y in Q3-2015 - Analysis

    Indonesia's economic performance in the third quarter of 2015 was a bit disappointing as the 4.73 percent year-on-year (y/y) growth pace in Q3-2015 was slightly below market expectations at 4.8 percent (y/y). On a positive note, however, Indonesia's gross domestic product (GDP) growth accelerated from the six-year low of 4.67 percent (y/y) in the preceding quarter. A look at the table below shows that Indonesia's third quarter GDP growth rarely outpaces growth in the second quarter. This is a hopeful sign indeed.

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  • World Bank Releases October 2015 Indonesia Economic Quarterly

    World Bank Releases October 2015 Indonesia Economic Quarterly

    Today (22/10), the World Bank released the October 2015 edition of its flagship Indonesia Economic Quarterly, titled "In Times of Global Volatility". In the report the World Bank states that despite current ongoing global uncertainties (caused by looming monetary tightening in the USA and China's economic slowdown), which make macroeconomic management difficult in the year ahead, pro-active government action could offset the negative impact and may help to boost growth.

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  • Economic Growth of Indonesia in Second Half 2014: Slowing or Growing?

    Indonesia’s gross domestic product (GDP) growth in the first half of 2014 reached 5.17 percent (year-on-year), thus continuing the slowing growth trend that has been recorded by the country since 2011. Forecasts for GDP growth in the second half of 2014 indicate a slight improvement (to the range of 5.2 to 5.3 percent year-on-year) supported by strong household consumption, increased government spending and further growth of the trade and services sector. However, in recent quarters the official GDP figure has been lower than most forecasts.

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  • Economic Growth of Indonesia in Quarter I-2014 Projected at 5.75%

    Economic Growth of Indonesia in Quarter I-2014 Projected at 5.75%

    Indonesia's gross domestic product (GDP) growth is expected to move sideways in the first quarter of 2014. Finance Minister Chatib Basri forecasts a growth rate of between 5.7 and 5.8 percent, similar to the growth pace that was recorded in the fourth quarter of 2013 (5.78 percent). Based on data from Statistics Indonesia (BPS), economic growth in Indonesia has slowed since the second quarter of 2013. In Q2-2013, Indonesia's GDP expanded by 5.89 percent, thereby ending a ten-quarter streak of +6 percentage growth.

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  • Indonesia Jumps to No. 38 in Global Competitiveness Index 2013-2014

    Indonesia Jumps to No. 38 in Global Competitiveness Index 2013-2014

    In recent weeks, Indonesia has to cope with a large amount of negative publicity as large capital outflows from the country's financial markets occurred, partly due to weak economic results regarding the current account balance, inflation and the the rupiah. Interest rates are rising, thus eroding people's purchasing power and consequently curbing economic growth. However, the Global Competitiveness Index 2013-2014, released by World Economic Forum, contained a positive outcome for Southeast Asia's largest economy.

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  • Indonesian Government Proposes $32.6 Billion of Subsidy Spending in 2014

    The government of Indonesia proposes to allocate IDR 336.24 trillion (USD $32.6 billion) for subsidy spending in the 2014 state budget draft: IDR 284.7 trillion (USD $27.6 billion) for energy subsidies and IDR 51.6 trillion (USD $5.0 billion) for non-energy subsidies. The proposed amount implies a 3.41 percent fall in total subsidy allocation compared to Indonesia's state budget in 2013. However, despite a reduction, subsidy expenditure is still large at 18.5 percent of total government spending (IDR 1,816.7 trillion).

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