Thursday, 11 October 2012


Beyond the predication of economists, Indonesia’s economy could surprisingly grow by 6.4% in quarter II 2012. This was indeed a picture of positive economic performance. Amidst uncertain global economy growth, moreover amidst sarcastic remarks that Indonesia was like an aircraft flying by autopilot. Remarkable indeed. 

However, Indonesia must not be off-guard of the threat of global crisis as indicated by export downturn and deficit of trade balance which was felt stronger in quarter III and IV. Many economists believed that the effect of export downturn and deficit of trade balance would not be felt until quarter III and IV.

With contribution of export to GDP which was not too significant, downturn of export would certainly be felt, but not in quarter II. It was estimated that in quarter III and IV Indonesia’s economy would be losing system and growth would fall to 6% - 6.2%.

The APBN State Budget would be interrupted as well as energy subsidy continued to swell; even if oil consumption were not condoled the cost would reach Rp 200 trillion and subsidy for electricity would reach Rp 100 trillion. There were fantastic figures.

A daring proposition came up, that in APBN State Budget 2013 the Government increased price of oil and electricity at reasonable level. To maintain budget’s health, let’s assume oil price be increased by Rp 1,000/liter to force the people to be thrifty. When under pressure, people would be sensible enough to live a life of simplicity as a new tradition.

The Central Board of Statistics (BPS) had noted Indonesia’s economy had grown by 6.4% in quarter II-2012 compared to same Quarter of 2011. Accumulatively Indonesia’s economic growth through Semester I-2012 when compared to Semester I-2011 would grow by 6.3%.

Indonesia’s economic growth measured on the basis of GDP in quarter II-2012 was 2.8% compared to quarter I. The transportation sector grew highest (10.1%) followed by the trading, hotel, and restaurant (8.9%). The mining and excavation sectors grew the least, i.e. 3.1%. But in terms of contribution, trading, hotel and restaurant contributed most to economic growth (1.6%). Thereafter the processing industry 1.4%, transportation and communication 1% and the sectors of finance, real estate, and company service 0.7%.

In terms of expenditure, Indonesia’s GDP which totaled Rp 2,050.1 trillion through quarter II-2012 for the most part originated from household expenditure constituting 53.5% whilst formation of gross fixed capital (PMTB) air direct investment contributed 32.9% and Government consumption expenditure 9%. The high portion of KRT was driven by increased population and uplifted consumption. In addition to that July was signified by holidays and beginning of fasting month.

In the future the Government and business players must be on the alert. Global economic slowdown, especially China apparently had great impact on Indonesia. It seemed reasonable that Indonesia’s economic growth by end of 2012 was estimated to reached 6.1% - 3.2%. The Government might have the ambition to attain the level of 6.5%, but objectively the propelling force of growth would be limited.

According to economists circles the world’s economic decline especially in China was the main reason why Indonesia’s economic growth was slowed down. This was because Indonesia was too highly dependent on China in terms in terms of export and import. If China’ economy slumped by 1% alone, it would generate the chain effect on other countries including Indonesia.

In June 2012, Indonesia was having the biggest trade deficit amounting to USD 1.3 billion with China, followed by Japan USD 665 million. Nevertheless domestic consumption and Foreign Direct Investment (FDI) was still the fundamental propeller of economy. However, Government expenditure was best to be jacked up in quarter III and IV to substitute the weakening export. In view of trade balance which would be in deficit till end of year, the Government was predicted to make intervention and keep deficit from swelling to more than 2%.

Meanwhile Bank Indonesia remained to maintain benchmark interest (BI rate) at 5.25% Bank Indonesia was keeping watch over deficit of current transaction underway because export slumped amidst global unimpressive economic condition indicated by high import. Bank Indonesia continued to strengthen policy measures to enhance external balance so deficit of current transaction could be kept at sustainable level.

BI would maintain stability of Rupiah value in accordance with Indonesia’s fundamental economic condition. In addition to that to keep coordinating with the Government in meeting domestic demand in tandem with stabililizing effort of Indonesia’s macro economy and continuity of national economic growth.

By the above measure, pressures form the balance of payment would again be reduced in the second half of 2012. As known, deficit of current transaction was seen to increase in quarter II-2012. The increase was seen to increase in quarter II-2012. The increase was on account of lowered export performance at a time when import, especially raw materials and capital goods increased notably.

On the other hand capital and financial transaction were showing notable surplus in the form of foreign direct investment, (PMA) portfolio investment or overseas borrowing by the private sector. The development showed that  amidst uncertain global economic condition, foreign investors’ confidence in Indonesia’ national economic resilience and prospect were still high.

In the second half of this year, deficit of current transaction was lessened to the level which did not endanger national economic stability. The estimate was based on the expectations that the global economic condition and price of export commodity would be better, supported by responsive policies of BI and the Government.

Investments and import activities of capital goods which were growth fast lately, were expected to step up capacity of domestic economy whereby to reduce dependency on import in time to come. Meanwhile forex reserves by end of July 2012 rose slightly compared to previous month, i.e., reaching USD 106.6 billion or equal to 5.6 month of import.

By the above picture, Indonesia’s economic projection for quarter III and quarter III and quarter IV around 6.3% respectively could sustain annual economic growth at around 6.2% - 6.4% for this year provider that there would be no unusual bad occurrence which could interrupt the economic machine. If the Government’s economic acceleration plan were realized, accompanied by efforts to suppress import of raw materials and capital goods, projection growth could be uplifted to the range of 6,3% - 6,5%. Not bad for a country struggling to develop like Indonesia. 

Business News - August 15, 2012              

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