JAKARTA (TheInsiderStories) - Indonesia government and XI Commission of House of Representative set the economic growth for 2017’s State Budget at 5.1 percent after long discussion on Wednesday night.
Previously President Joko Widodo is predicted the economic growth to reach around 5.5 to 5.9 percent in 2017, boosted by public spending at the range 5.1 – 5.2 percent, government spending growth of 6.2 to 6.5 percent and investment growth of around 6.4 to 6.7 percent.
During the meeting, Finance Minister Sri Mulyani Indrawati predicted the economy to grow between 5.1 percent and 5.2 percent next year, mostly driven by investment, which is expected to grow 6.1 percent, assuming capital inflow from the tax amnesty program boosts investment. Otherwise, Governor of Bank Indonesia (BI) Agus Martowardojo said thet the central bank estimated the economy to grow 5.21 percent in the 2017.
“This phenomenon raises complicated problems for the world economy. Many central banks expanding money supply (quantitative easing). Even so confidence was never picked up. From the fiscal side many countries provide fiscal stimulus with how to do deficit financing with interest rate in the negative constraint. This means the negative revenue will dropping the export import,” She said at the hearing with XI Commission.
In domestic front, there are positive signs, including speed up of government expenditures and infrastructure development programs. The fundamental of Indonesia’s economy is relatively strong as seen by controlled inflation.
In this year, the finance minister sees the economic growth will ended at 5.2 percent, inflation of 3.6 percent, T-bill rate 5.4 percent, exchange rate Rp13,300 against US dollar, oil price $40 a barrel and oil llifting 820 000 BOPD and gas 1,150 million BOEPD.
Indonesia government sets deficit for 2017 draft State Budget in the range 1.9 – 2.5 percent. The projected 2017 deficit assumes a weaker exchange rate for the rupiah and a stronger economic growth rate.
As for the inflation rate, the government and parliament have a similar assumption at the level 3 to 5 percent, while as for the rupiah exchange rate sets at Rp13,300 per US dollar on average.
Agus explained, until June 3, the average rate of Rupiah stood at Rp 13,592 against US dollar or appreciated 1.42 percent since January (ytd). In the future, he added, the Rupiah movement is expected to be still influenced by the Federal Reserves policy and China’s economic situation.
Agus adding, the stimulus for the economic growth comes from tax amnesty program. BI estimates repatriated assets from the tax amnesty program will reach Rp 180 trillion by the end of the year. However, the governor is optimistic that the capital inflow from repatriated assets will add liquidity to the banking industry and boost lending growth to reach 12.7 percent in 2017.
Following is the highlights of the 2017 State Budget:
- Fiscal Deficit 1.9 – 2.5%
- GDP: 5.1%
- Inflation: 4.0 plus minus 1%
- Exchange Rate: Rp 13,300
- Interest Rate of SPN 1 month: 5.3%
- Oil Price: $35-45 a barrel
- Oil Lifting: 740 – 750 MBOPD
- Gas Lifting: 1,050 – 1,150 MMBTU