JAKARTA (TheInsiderStories) - The government and the Budget Committee of the House of Representatives had agreed to lower the economic growth projection as set in the 2016 State Budget to 5.2 percent from 5.3 percent.
The working committee also sets other macro-assumptions, such as inflation rate at 4.0 percent, rupiah exchange rate at Rp 13,500 per US dollar, and the 3-month state treasury bill interest rate of 5.5 percent per annum, while the State Budget deficit is set at 2.51 percent of GDP, from 2.48 percent set earlier.
Bank Indonsia Deputy Governor Perry Warjiyo said the economic growth is set at that level, assuming that the government’s capital expenditure is accelerated.
To support the growth, Bank Indonesia will continue to implement macro-prudential policies, including encourage banks to increase credit allocation, maintain bank liquidity. The problem is that demand for credit is not as expected as companies are still operating below their capacity.
BI expects Q2 economic growth to be higher than in the first quarter in the hope that the acceleration of government expenditure will stimulate domestic demand and boost private sectors production capacity.
The Head of Fiscal Policy Agency at the Finance Ministry Suahasil Nazara said that the economic growth of 5.2 percent is within reach, thanks also to the support of the central bank to issue more conducive monetary policies.
Vice President Jusuf Kalla said that the economic growth target is a logical thing to do given the current situation. The revision, he added, is caused by declining export activities and also downtrend of import, which resulted in a deceleration of industrial activities.
Finance Minister Bambang Brodjonegoro also said that an economic growth target of 5.2 percent is more realistic given this year’s slowing global economy.
In the first quarter of this year, Indonesia’s economy only grew by 4.92 percent, lower than economic growth in the fourth quarter last year. (*)