Government, Lawmakers Agree 5.2%-5.6% GDP Growth

The United States needs to resist protectionist trade measures that could 'ruin the world,' Indonesian Finance Minister Sri Mulyani said on Monday (29/01) (Photo: Ministry of Finance)

JAKARTA (TheInsiderStories)—The government and lawmakers has approved the macroeconomic assumptions in the 2019’s State budget with a lower economic growth target of 5.2 per cent to 5.6 per cent.

The initial economic growth target proposed by the government was 5.4 per cent to 5.8 per cent. The 5.2 per cent to 5.6 per cent is similar to the Bank Indonesia’s forecast.

Finance Minister Sri Mulyani Indrawati agreed with the central bank assumption to boost the household consumption above 5 per cent. The household consumption, the backbone of Indonesia’s economy, grew below 5 percent in 2017, based on Indonesia Statistics data, first since 2010. The household consumption also grew only 4.95 per cent in the first quarter of 2018.

The rupiah exchange rate set based on the government’s proposal of Rp13,700-Rp14,000 per US$1. The House also approved the inflation assumption in 2019 state budget at 2.5 per cent to 4.5 per cent, while the three-month treasury bills interest rate in the range of 4.6 per cent to 5.2 per cent.

Furthermore, the open unemployment rate is targeted at 4.8 per cent to 5.2 per cent, while the poverty rate is targeted at 8.5 per cent to 9.5 per cent. Gini ratio set at level 0.38-0.39 and Human Development Index (HDI) of 71.98.

Mulyani earlier said the forecast reflected four interest rate hikes in 2018 and a hawkish stance in 2019 by the US Federal Reserve, as well as less portfolio flows into emerging markets in the next two years.

Indonesian government targets economic growth of 5.18 per cent to 5.4 per cent in 2018. The country booked 5.06 per cent economic growth in the first quarter of 2018, higher than 5.01 per cent in the first quarter last year.

Indonesia has experienced strong economic growth and a steady poverty reduction over the past decade, but the end of the commodity boom, accompanied by slowing poverty reduction and rising inequality, has put pressure on the country’s overall economic development.

Indonesia’s average annual growth rate was 5.6 per cent in the period 2001-12, equivalent to a GDP per capita of about US$3,500. The national poverty rate was halved to 11.2 per cent in the period from 1999 to 2015, largely through sustained growth and job creation.

However, the decline in commodity prices and demand slowed growth to 4.8 per cent in 2015, 5.1 percent in 2016, and 5.07 per cent in 2017. The pace of poverty reduction also began to stagnate around this time, with a near zero decline in 2015, accompanied by rising inequality, as measured by the Gini coefficient.