Whoever the President, the
next Government must work hard to restore national economy. Understandable
because al year through indicators of economic. slowdown had been too visible
to be denied. The indicators testified the trend, among them was the degree of
budget absorption.
Over the past 4 months of
2014 realization of Government's spending in APBN State Budget was posted at Rp
432.68 trillion or 23.5%. By percentage not any better than the same period of
previous year at 23.7%.
Less realization of
expenditure was indicated by less transfer of fund to the regions which was
less by 4.9% this year. Furthermore, Central Government's expenditure was
higher by 1.8% compared to last year. Meanwhile realization of income and
grant per April 30, 2014 was Rp 413.11 trillion or 24.8% of target. By percentage,
an increase against same period of previous year at 23.5%. The increase was on
account of realization of incomefrom-tax which increased by 1.2 % while non
tax state income [PNBP].
By expenditure and tax
income, APBN 2014 had posted deficit of Rp19.57 trillion lower than that of
same period last year at Rp 38.99 trillion. Realization of financing per April
30 was Rp 120.23 trillion or 68.6% of target, higher than same period of previous
year at 49.1 %. This was due to Government's front loading policy. Financing
from bond resources was exercised every budget year.
In the posture of APBN
State Budget 2014, the breakdown of state budget income and expenditure was
visible. State's revenues was supported by income from tax Rp 354.4 trillion
[27.7%] consisting of domestic taxes [27.7%] and international trading taxes Rp
14.9 trillion [27.6%]. Furthermore with added non-tax state's income [PNBP] Rp
58.4 trillion [15.2%].
Meanwhile state's
expenditure of the Central Government was Rp 256.1 trillion [20.5%] consisting
of wages Rp 72.1 trillion [27.8%], social aid Rp 20.1 trillion [21.9%] and
others Rp0.7 trillion [1.7%]. Furthermore there was transfer to regions Rp 176.6
trillion [29.8%] consisting of Regional Balancing Fund Rp 147.1 trillion
[30.1%]. Special Autonomy Fund and Adjustment Rp 29.5 trillion [28.2%].
With volume of income being
less than expenditure, there was deficit of Rp 19.57 trillion. For that
matter, deficit would be supported by domestic financing Rp 130.2 trillion
[66.3%] and net overseas expenditure minus Rp 9.9 trillion [47.5%].
Swelling of energy subsidy
burden was because weakening of Rupiah made deficit in APBN State Budget to
swell. Therefore unless macro assumption was revised, the Government was
worried that deficit might soar up exceeding permitted level by the Law, i.e.
3% of gross domestic product.
Unless macro assumption was
revised, deficit in APBN state budget 2014 might swell to Rp 472 trillion or
4.6% of GDP. One of the triggers was weakening of Rupiah. Every weakening of
Rupiah of Rp 100 of exchange rate value, deficit burden would increase by Rp 3
trillion to Rp 4 trillion.
The subsidy fund was one of
the funds that developed notably due to depreciation of Rupiah. Unfortunately
there was no breakdown of subsidy up-jump for energy due to missed assumption;
but one thing was sure APBN-P 2014 State Budget for energy swelled from Rp 110.03
trillion to Rp 392.13 trillion.
As footnote in APBN 2014
the Government assumed Rupiah value at Rp 10,500 per USD. Meanwhile in RAPBN-P
2014 State Budget the Government proposed assumption of Rupiah value at Rp 11,700
per USD. In Government's calculation, the change in acro assumption expanded
deficit by Rp 48 trillion.
Previously in APBN 2014 the
Government assessed deficit of State Budget at Rp 175.35 trillion or 1.69% of
GDP; meanwhile in APBN-P 2014 budget deficit was still set at Rp 251.7
trillion or 2.5% of GDP. Unless deficit swelling was overcome, the effect would
chain-strike to all economic aspects in Indonesia. The high budget deficit
could slow down national economic growth.
Other side effect was that
state's income would be reduced, especially income from the tax sector. If
economic growth was set at 6% according to APBN 2014, income-from-tax had the
potential to drop to Rp 110 trillion. For information, in RAPBN 2014 the
Government set income-from-tax at Rp 1,110.19. But in RAPBN-P 2014 the Government
revised of income from tax to become Rp 1,059,79 trillion.
Currency exchange rate and
economic growth were components which were significant impact on budget.
Meanwhile so far energy subsidy was a post of highest impact on exchange rate
value. Like it or not, the Government must reduce subsidy budget so state
budget would have enough room to energize. Unless reduced, there would be no
room for jacking up growth.
Global economic slowdown
and the magnitude of budget deficit which was tackled by was of budget axing,
would predictably had its impact on economic growth this year. BI predicted
economic growth this year would only reach 5.15%.
As known, the effect of
budget axing would make state budget to shrink. Without budget axing, economic
growth could be in the range of 5.35%. Somehow this economic growth of 5.15%
was still in line Indonesia's economic growth target set by BI at 5.1% - 5.5 %.
This year the Government
planned to axe budget of around Rp100 trillion. This budget axing was legalized
in Presidential Instruction [Inpres] No. 4/2001. Previously Ministerial budget
was allocated at Rp 637.841 trillion.
Although predictably
slowing down, the Government was still optimistic to attain economic growth as
stipulated in RAPBN-P State Budget 2014. The assumption of 5.5% economic growth
was inclusive of Ministerial austerity plan.
Like it or not, fact showed
that Indonesia's economic growth was slowing down. Until Q-1 2014 Indonesia's
annual growth was only 5.21%. It was still positive, but it was the lowest
growth in the past 5 years. For comparison, over the same period of 2013 last
Indonesia's economic growth was still 6.03%.
The trend of economic
slowdown did not only sweep Indonesia, many other countries in the world was
having the same faith. The USA, China, Thailand, Vietnam, the Philippines were
having economic slowdown. America' economy, for example only posted growth of
0.1% in Q 1 2014 which was the worst growth record since 2011.
However, slowdown in
Indonesia's economic growth was noteworthy. The undesirable condition was due
to many factors.
Firstly, this was normally
a cycle process: especially in infra-structure, manufacturing and construction,
usually Government's spending in that sector turned maximum toward year end.
Secondly, this was the
Government's deliberate act to put brakes on export to minimize deficit in
current transaction. The result was that exporters who relied on export like
manufacturing and mining, must bear the consequences. Many economists rate that
the slowdown was by design on Government's part, but it they were overdoing it.
Thirdly, increase in
Provincial Minimum Wages [UMP] contributed to slowdown process. Data of the
Ministry of Manpower and Transmigration had it that the average of UMP increase
this year was 14.68%. All in all burden of the businessworld increased which
down pressed production capacity. Economic slowdown was also reflected in the
performance of company's business.
Financial report of public
companies in Q 1 2014 more or less showed trend of downturn against same period
of the previous year. At lease such was visible in emitents' revenue. The
average income growth of companies per Q 1 2014 was only 14.28%. And yet over
same period through 2013, the average income growth of all emitents only came
to 24.06%.Somehow not all industrial sectors were posting downturn of growth.
Of 9 industrial sectors at BEI, 3 industrial sectors were growing in terms of
income.
Fourthly, slowdown in
economic growth was the side effect of 'Legislative and Presidential election.
Investors would wish to see what was the policy of the next Government would
be.
The trend of economic
slowdown had for long been predicted by the World Bank. According the World
Bank, developing countries were facing disappointing growth rate this year, the
World Bank saw that various global economic trends would make some developing
country grow slowly.
The World Bank lowered
growth estimate of developing countries. Previously in January growth of
developing countries was estimated at 5.3%, now lowered to 4.8%. Foul weather
in America, crisis in Ukraine, economic slowdown in China, political unrest in
some middle income states and slow process of structural reformation
contributed to slow process of economic recovery in advanced states as a whole.
So it was important for
developing countries to move fast and invest more in structural reformation at
home to drive economic growth to ideal level to end poverty. There were signals
of strengthening coming on toward 2015 and 2016 with growth of 5.4% and 5.5%
respectively this year, however it still depends on how successful recovery
effort in China would be.
The trend of economic
slowdown forced stakeholders in Indonesia to revise growth projection from 5.6%
to 5.3% this year. Not ignorable was performance in external linkages like
export, import and investment.
In spite of economic
slowdown, there was still optimism that economy would grow better in the second
half of this year. The reason was that in the second half of 2014 there would
be bettered investment in line with capital inflow from investors. As known,
investors were today still in wait-and-see stance in regard to political
situation in Indonesia.
In the event that the Presidential
Election run safely, chances are more investors would come to Indonesia. The
result was that in Q- III 2014 and Q IV Indonesia's economy might grow by 5.4%
and 5.5% respectively. (SS)
Business News - June 13, 2014
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