Bank Indonesia Headquarters in Jakarta - Photo: Privacy

JAKARTA (TheInsiderStories)Bank Indonesia (BI) predicts the country’s economy grew slope by 5.1 percent year-on-year (YoY) in the second quarter (2Q) of this year. The figure is obtained from the results of a survey conducted by the central bank on export-import data, investment, and consumer surveys.

“The trend of economic growth in the second quarter is sloping. Sloping means, if the year on year growth is almost the same as economic growth in the first quarter. Approximately 5.07-5.1 percent,” said BI’ governor Perry Warjiyo in Jakarta, Monday (07/8)

Warjiyo adds the source  in the 2Q was mainly contributed by strong household consumption due to general elections and celebrations of the holy month of Ramadan. Also, contributions from building investment, especially related to the continuation of infrastructure projects.

While related to exports, the governor said, the national export performance is expected to slow down following the massive trade war between the United States (US) and China during the 2Q of 2019. According to Warjiyo, a number of commodity exports and manufacturing were observed to decline. Only exports of coal and oil palm commodities are still performing positively.

“But for others, there is indeed an impact from a trade war. It is typical in Indonesia, if exports fall, imports will decline. That is the characteristic of growth in the second quarter of 2019,” he said.

Warjiyo revealed, the decline in export performance was due to declining demand from abroad. For example a decline in the performance of manufacturing exports to the US. He said the problem was influenced by the economic growth of the US which was slowing down.

“So the demand for exported goods is not only to Indonesia but from all countries it has indeed declined. Except for a number of countries, such as Vietnam because they can fulfill what was previously supplied by China to the US,” he said.

Therefore, said Warjiyo, one of the strategies that the government needs to do is to fill the market that was once supplied by China. The way is by increasing bilateral trade relations with the target countries.

“Trade war can provide an opportunity, not only a negative impact. The strategy is that with the US, it must be bilaterally more effective than multilateral or regional trade. The way is to send more trade missions to the US to be able to sell there,” he adds.

The central bank predictions are based on export-import data, investment, and consumer surveys. The export-import performance is indeed in the spotlight after President Joko Widodo on Monday criticized his ministers due to the country’s widening current account deficit (CAD). In the 1Q of 2019, the CAD widened to US$6.97 billion from an upwardly revised $5.34 billion gap a year earlier, equivalent to 2.6 percent of the country’s gross domestic product.

Indonesia’ goods account surplus narrowed sharply to $1.06 billion from $2.32 billion a year ago, with exports falling 8.6 percent and imports declining 6.1 percent and the services account gap increased to $1.79 billion from $1.57 billion. Also, the primary income shortfall rose to $8.10 billion from $7.39 billion and the secondary income deficit advanced to $1.87 billion from $1.44 billion, statistics agency data showed.

While the Investment Coordinating Board reported that the country recorded realization investment Rp195 trillion ($$13.73 billion) in 1Q, reached only 24.6 percent of the investment target Rp792.0 trillion in 2019.

Furthermore, Indonesia’s consumer confidence index dropped to 126.4 in June 2019 from a record high of 128.2 in the previous month. This was the weakest reading since March, as the index of economic outlook fell by 4.8 points (138.1 vs 142.9 in May) and the gauge measuring income expectations for the next six months declined 4.2 points (146.2 vs 150.4).

In addition, the measure of job availability expectations dropped 3.2 points (128.2 vs 131.4). Meanwhile, the measure of current income edged up 0.3 points (126.5 vs 126.2) and the index of current economic conditions rose by 1.2 points (114.7 vs 113.5). Also, the gauge measuring job availability compared to six months ago increased 2.3 points (101.0 vs 98.7), with the index of whether it was a good time to buy durable goods going up 1 point (116.6 vs 115.6).

US$1=Rp14.200

Written by Lexy Nantu, Email: lexy@theinsiderstories.com