A SECOND LOOK AT ECONOMIC GROWTH PROJECTION 2012

The Central Board of Statistics (BPS) released Indonesia’s economic growth in Quarter III 2012 reaching 6.17% compared to same period last year. The economic growth of Quarter III compared to Quarter II-2012 was 3.21%.

The highest growth was happening in the transportation and communication sector 10.48%, by nominal value GDP year-on-year reached Rp 6,151.6 trillion. In terms of quarter-by-quarter growth was posted at Rp 2,122 trillion.

Hence accumulatively (January - September) until quarter III 2012, Indonesia’s economic growth was posted at 6.22%. The greatest propeller of GDP quarter II 2012 was gross fixed investment accumulatively, i.e. reaching 10.77%.

Furthermore followed by household consumption growing by 5.29% while Government’s consumption became 2.93%. This was due to lowered employees expenditure, while realization of 13^th month salary was also paid in quarter II so it was a higher. In trading, export contributed growth of 2.21% while import contributed 6.04%.

Geographically, Java was still playing the role as the main propeller of Indonesia’s economic growth, contributing 57.52% to growth, followed by Sumatera 23.82%, Kalimantan 9.26%, Sulawesi 4.75% and other areas 4.64%.

BPS also noted nominal GDP in quarter III 2012 on Constant Priced (ADHK) amounting to Rp 671.5 trillion. Meanwhile based on Applicable Basic Price (ADHB) amounting to Rp 2,122.8 trillion the accumulated amount of GDP in quarter III-2012 come to Rp 6,151 trillion.

The contributing components to GDP were among others consumption which grew by 5.68% and investment from the Formation of Gross Fixed Capital (PMTB) which grew positively by 10.02%. Meanwhile the export sector growth was posted at minus 2.78% and import minus 0.52% including Government spending minus 3.22%.

The GDP was contributed annually [y o y] by the agricultural sector, livestock farm, forestry and fishery 6.15%, transportation and Communication 4.2%; and industry and processing 3.99%. In addition to that there was a sector noted as having highest annual growth among others: transportation and communication 10.48%; construction 7.98%; finance, real estate and company service 7.41%. The Minery sector was pushing downward so the annual economic growth was having downturn because minery oil-gas were growing at minus 0.09%.

In view of economic attainment up to September 2012, Indonesia’s economic growth this year would by prediction not meet the target of 6.5% as assumed in APBN-P State Budget 2012. The reason was that international trading was still having slowdown. Accumulatively, growth by quarter III-2012 compared to same period of 2011 was posted at 6.29%.

As known there were many factors which influenced national economic growth this year. All depended on the measure taken by the Government in controlling export and import. If the Government could find a new market for export expansion and at the of this year could find a new market for export expansion and at the same time put brakes on import, growth projection of this year could be driven to the range of 6.3% - 6.5%. If the Government was expecting economic growth through 2012 could reach the target of 6.5%, the condition was not easy because in that case the Government must pursue economic growth in quarter IV at 6.7%.

In tandem with the above, Government spending must also be spurred on to cover up downturn in export. Even Government spending must be wise, in the sense that it would generate multiplier effect on the real sector instead of just spending the budget.

In quarter IV this year, predictably people’s consumption, investment and Government’s expenditure would remain high based on annual trend. Therefore effort must be doubled so growth in quarter IV would reach 6.5% - 6.&% so annual economic growth could be in the range of 6.3% - 6.6%.

Perhaps direct investment could be something to pin hope on beside household consumption. As known, Indonesia economic growth of 6.7% till end of third quarter 2012 last was influenced by external factor with slowing down global economy and export. Therefore Indonesia must be cautious about the global situation. So far investment flow was still well underway but the development of global economy was way beyond control.

Many economists and analysts predicted Indonesia’s economic growth by end of 2012 would be supported by Government expenditure and investment. Therefore the Government was expected to speed up spending and increase investments. Besides, people’s purchasing power was expected to be well maintained. Global economic uncertainty would still continue over next year so investment must be safeguarded till 2013.

Of total direct investment amounting to Rp 281 trillion, so far around Rp 230 trillion was realized. This was based on the assumption average quarter investment amounting to Rp 75 trillion. Hence, projection of investment value would reach around Rp 300 trillion. A vast amount strong enough to jack up the real sector. The brighter side of it was that investment flow was not only concentrated in Java but also spreading out to Sumatera, Kalimantan, and Sulawesi.

The Government must also still work hard to troubleshoot problems in labor so the industry could normally operate to the maximum. As known, acts of sweeping by labor unions and intimidation by them sometime ago more or less interrupted production activities of 150 companies in Bekasi, which hindrance activities of 150,000 workers. Sweeping by labor unions disturbed performance of labor-intensive projects.

Acts of sweeping and intimidation by labor unions made investment climate in this country intolerable. The condition was made worse by lack of law enforcement. It would be hard for the Government to make Indonesia a country of investment destination by next year unless there was sound solution to labor problems. Acts of sweeping by labor unions made investments to be stagnated while foreign investors were ready to relocate their industry to other countries.

Supposedly payroll system and workers social welfare were not determined by acts of sweeping by labor unions by the existing rules and regulations.

On the other hand, the Government through the Ministry of Labor and Transmigration Muhaimin Iskandar were asking Governors participants of the Regional Remuneration Council (Dipeda) were accelerating discussion and Stipulation on Provincial Minimum wages (UMP) 2013.

According to data of November 3, 2012 only six provinces had stipulated UMP 2013, i.e. Papua, Bengkulu, Bangka Belitung, North Sumatera, South Kalimantan and West Kalimantan. For UMP 2013 the Provincial Government of Papua stipulated UMR at Rp. 1.72 million, Bengkulu Rp 1.2 million, Bangka Belitung Rp 2.265 million, North Sumatera Rp 1.305 million, South Kalimantan Rp. 1.337 million, and West Kalimantan Rp 1.06 million.

The Ministry of Labor and Trans migration had asked the Governors of Jakarta, West Java and Banten to stipulate and synchronize UMR of 2013. Synchronize and alignment was necessary so UMR 2013 could be commonly agreed upon so as to avoid unrest among workers against employers.

Stipulation of UMP 2013 must consider various conditions. However, for the sake of common interest, stipulation of UMP 2013 must be done to make it effective and complied to by all related parties especially businesspeople and workers.

Stipulation of minimum wages (UMR) was not only based on Decent Living Components Values (KHL). In accordance with the Permernakertrans Rules no 13 2012, there were other variables in scheming up UMP, i.e. productivity, economic growth, condition of the labor market, low capacity business, worker’s welfare etc.

Without the Government setting up the above strategic agenda, accompanied by the Government’s effort to straighten out various employment problems, projection of economic growth this year by end of this year would only be around 6.2% - 6.3%. Moreover the Government still had to struggle to control inflation not to exceed 5% so economic growth above 6% could be realized and be meaningful.

Previously BPS reported inflation level in October 2012 reached 0.16% This figure was an increase against inflation of September 2012 which reached its lowest level at 0.01%.

Based on year-on-year calculation, inflation in October 2012 reached 4.61% while inflation in year underway (January - October 2012) reached 3.66%. Prices of goods were under control which had its positive impact on purchasing power.

Of 66 cities in Indonesia there were 37 cities having inflation and 29 cities were having deflation. Highest was happening in Manokwari 0.97% and Padang 0.71%. Meanwhile lowest inflation was happening in Kediri 0.01% and highest inflation was posted in Ambon 2.44% and Pontianak 1.55%.

Inflation of core components almost equaled general inflation. Commodities moving in the course of general development was starting to move slightly high. This could only be controlled by BI. According to expenditure components, food was still having deflation of 0.43% Transportation, Communication and Financial Service were also having 0.02 deflation. By November and December it was expected there would be no extreme up jump, so inflation could be controlled at bellow 5%. The commonly agreed figure was 4.7% - 4.9%.

Business News - November 9, 2012