The Central Board of Statistics (BPS) officially announced that national economy was slowing down as indicated by growth in Q-1 2015 which was only 4.71% lower than same period last year at 5.2%.
Economic slowdown started from the production or consumption side. On the production side there were four factors that caused economic slowdown in Q-1/2015. Firstly, food production that dropped due to delayed planting time Secondly, production of crude oil having contraction so production output grew negative and pushed manufacturing down which only grew by 3.8%.
Thirdly, distribution process slowed down due to less imported products. There was downturn of export for capital goods, auxiliary Goods and consumer goods. BPS noted import in Q-1/2015 dropped by 2.2% (y o y) and dropped by 9.98% (q t q). Fourthly, on the production side, low construction performance due to late realization of developments.
Meanwhile in terms of expenditure, at least there were six causes of economic slowdown in Q 1/2015. Some of the causes were all expenditures for household consumption slowed down and also Government consumption slowed down and also Government consumption expenditure slowing down.
Other causes were: contracting export due to falling commodity prices and economic slowdown among buyer countries. Lastly, export of services were contracting too due to reduced number of incoming tourist and their expenditures.
Still on the production side, growth was signified by seasonal factors in Agriculture, Forestry, and Fishery which grew by 14.63% while in terms of expenditure it was more caused by investment performance (minus 4.725) and export (minus 5.98%).
Indonesia’s economy structure in Q 1/2015 was dominate by Provinces in Java and Sumatra. The Provinces in Java contributed most to national GDP i.e. 58.30% followed by Sumatra 22,56% and Kalimantan 8.26%.
BPS announced that per February 2015 open joblessness grew by 300,000 people to 7,45 million people or 5.81% of total productive generation. Previously unemployment was only 5.7% or 7,15 million people. And yet APBN-P 2015 set unemployment target at 5.6%.
As predicted, the public rated performance of economic ministers as unsatisfactory. The public were disappointed by prices of essential need and energy which kept on soaring high. On of the serious effect of worsening economy was foreign capital walking out of the stock hall. Most stakeholders of the stockmarket were deeply disappointed by Indonesia’s bad performance in economy.
Stockholders were on selling spree since BPS announced macro economic data of Q 1/2015. Economist rated that the slowdown was because Government’s effort to spur on economic growth had not been maximized.
To review Government’s annual expenditure performance, the growth was only 2.2% against that of the previous year at 6.1%. Besides there was downturn of people’s consumption which contributed 58% to GDP. Consumption only grew by 4.5% annually against the previous 5.6%. weakening of global economy also suppressed Indonesia’s economy because it suppressed export.
Commodity prices, especially palm and coal, continued to drop steeply causing companies’ income in that sector to drop, including that of the workers. Nevertheless direct investment had been contributive. It was any higher than last which came to 4.7% but investment grew quite satisfactorily at 4.4% per year. The growth was worth Rp.124 trillion or 24% of Government target this year.
In view of realization of economic growth of Q 1/2015 which was 4.71%, it was not a exaggeration to say that the signal was yellow light. Economist believed that there were two choices for the Government to make things change for the better. Firstly, there must be courage on the side of President Joko Widodo to make cabinet reshuffle. Secondly extra stimulus was needed by way of making new economic strategy.
Cabinet reshuffle was one of the thinkable ways to improve Government’s performance which was rated as the rot of failure. The President’s assistants who performed low should better be relaxed. Somehow the change the ministers who were regarded as the weak spots was not an easy task for the Government considering that the present cabinet was a “rainbow cabinet” made up of various socio political components.
Bad economic performance was related to the underlying political condition. Political turbulence caused by tug-of-war had diminished businesspeople’s desire to expand business.
About cabinet reshuffle Jokowi would overhaul his cabinet. So a second alternative way could be considered, i.e. to increase stimulus through another policy package.
In this case the Government could collaborate with BI in making the new proposal package. One of the thinkable ways was to lower BI rate. The high interest rate to today was felt to restrict investor’s maneuvers.
Apparently poor coordination triggered blame-each-other quarrels which was unproductive. For example the effort to pursue as much as possible income-from-tax was contrary to industrial development enhancement at home through tax incentives giving to investors.
One clear example was investment potentials in electronics. To day many electronics manufacturers in China relocating their industry to other countries, the total investment value baing around USD 300 billion. Unfortunately the Government was unable to grab the opportunity as investment climate in Indonesia was not ready for it. And yet some funds were already available in the APBB-P 2015 budget and all the Government had to do was to maximize Government’s expenditure accordingly.
Economic growth in QII onward was expected to be triggered by Government’s expenditure as stimulus. To be understood, slow budget expenditure in Q 1 was the cause of economic slowdown. Indonesia’s economic recovery was the crucial bet for the economic team of the cabinet whatever the condition.
Although economic slowdown was a global trend today, it should be the ground for the Government to make excuses or reason to justify failures but be more watchful instead to avoid the next economic hurricane to come.
Amidst global economic pressures it was necessary for the Government to observe the probability level of national economic shock which was still high especially when people’s purchasing power slumped. Government’s responsiveness was indispensable.
Noteworthy was IMF’s prediction that economic growth of developing countries in 2015 would only be 4.3% (against 4.5% of previous year) while growth rate of developing countries was more positive at 2.4% (against 1.8% last year). The World Bank also predicted Indonesia’s economic growth would be 5,2% this year.
From the above picture predictably Indonesia’s economic growth would be below World Bank’s predictions if the Feds variable was included because sometime in the near future the Fed planned to increase FFR which had the potential of capital exodus from developing countries and increase of BI rate.
By April 2015 last, some national economic indicators underscored the potentials of economic turbulence:
Firstly, absorption of APBN State Budget in Q 1/2015 which was only around 20% with effect on other economic activities. Admittedly so far APBN was the propeller of national economy, especially when other sectors were under pressure.
Secondly, low absorption of APBN, some infra structure projects which were late contributed to credit pipelining and slump of domestic consumption. BI released pipelining of credit in Q-1/2015 would be 12% or lower than that of Q 1/2014 which was above 18%.
Thirdly, the industrial sector was weakening through Q 1/2015. Outcome of SKDU survey run BI showed that net SBT balance of Q 1/2015 grew by 4.83%, lower than Q 4/2014 at 11.03%. Result of SKDU showed that the average production capacity was only 73.06% or down compared to Q 4.2014 at 79.78%.
Data of BEI disclosed that stockmarket capitalization per April 30 2015 last was Rp.5,164 trillion or down by Rp.315 trillion against the position on April 24 2015. Exit of foreign capital at the stockmarket happened as some big emitents publish their performance of Q 1/2015 which was below expectation. Nearly all sectors like retail, infra structure, heavy equipments, banking, automotive and minerals showed notably low financial performance.
All the economic indicators were early warning for the Government in managing national economy especially in a condition full uncertainty. So if President Jokowi had to reshuffle his cabinet, it must be done with the objective to restore Indonesia’s economy and bring it back to past to past glory. (SS)
Business New - May 13, 2015