JAKARTA (TheInsiderStories) – Bank Indonesia (BI) expects the Indonesian economy to expand by 5.15 per cent in second quarter this year higher than first quarter 5.06 per cent, on the back of strong commodity prices and fiscal stimulus policies aimed to boost consumption during religious holiday in mid-year.
Newly appointed BI Governor Perry Warjiyo said strong commodity prices would also give an economic boost to regions outside of Java Islands, such as Sumatra and Kalimantan, which rely heavily on the export of commodities.
During the first quarter of the year, the GDP expanded by 5.06 percent year-on-year (yoy), boosted by investment, while household spending disappointed with an increase of less than 5 percent yoy. As of the first quarter of 2018, new household consumption grew by 4.95 per cent with a share of 56.8 per cent economic growth.
Another driving factor, is the contribution of the financial sector, especially the credit channeling of the banking sector to the economy. By April 2018, loans extended by Indonesian banks grew 8.94 per cent from a year earlier, picking up from the 8.54 percent pace the month before.
Warjiyo said the Central Bank is preparing relaxation of housing finance from banks, to spur economic growth this year.
“So we encourage the housing sector to stimulate, as the housing sector can generally drive the economic cycle and the financial cycle,” he said on Friday (25/5).
Furthermore, Warjiyo expects the biggest economy in Southeast Asia will grow by 5.2 per cent this year.
Warjiyo, who has always campaigned for monetary policy and stability-pro, emphasized that in the remainder of the year BI will continue to prioritize monetary policy to maintain economic stability. However, BI will not neglect if there is an opportunity for the Central Bank to adjust its policies to boost economic growth.
“One of our monetary policy instruments will be to maintain stability, but we have four instruments for pro-growth,” he said.
The first four instruments are macroprudential policy relaxation, in which is the policy for relaxation in the field of housing finance. Then, the two macroprudential policies to accelerate the deepening of financial markets.
“This deepening financial market includes issuing infrastructure financing instruments,” he said.
Third, the payment system policy to improve the efficiency and effectiveness of national digital economy.
Furthermore, the fourth is to strengthen the acceleration of Islamic finance and economics, including building a halal product industry, and developing educational research and sharia economic campaigns.