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
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