Indonesia’s Economic Shrank at 0.52% in 1Q 2019
Chief of Indonesian Statistics Suhariyanto.

JAKARTA (TheInsiderStories) – Indonesia’s annual economic growth lowering to 5.02 percent in the third quarter (3Q) of 2019 after a 5.05 and 5.07 percent growth in the second and first quarter, also lower than 5.17 percent in the same quarter last year. This was the weakest growth since the June quarter 2017, Statistics Indonesia has reported today (11/05).

However, cumulatively, Indonesia’s gross domestic product reached 5.04 percent, expanded 3.06 percent quarter-on-quarter in the three months to September 2019, head of statistics agency Suhariyanto said in a press conference.

“Indonesia’s economic growth in the third quarter of 2019 was recorded at 5.02 percent. Compared to the same period of 2018 economic growth grew 3.06 percent,” he said.

From the production side, growth was driven by almost all business fields, with the highest growth being achieved by other service business fields which grew 10.72 percent. In terms of expenses, the highest growth was achieved by the nonprofit consumption expenditure component serving households which grew by 7.44 percent.

The agency also recorded the price of oil and gas and non-oil commodities on the international market in 3Q of 2019, in general, to decline in the quarter and annual basis. This certainly affects the Indonesian economy, Suhariyanto said.

One of them is a decline in the average price of Indonesian crude palm oil in 3Q of 2019, a 16.5 percent decline from the second quarter of 2018. Then coal fell 42.7 percent and palm oil dropped 6.85 percent, while rubber prices rose 1.79 percent.

“On the other hand, of Indonesia’s four main trading partners, the economy is growing but tends to slow down including China, the United States, South Korea, and Singapore. These are all factors that affect Indonesia’s economic growth,” he explained.

The spatial structure of the Indonesian economy in 3Q was dominated by provincial groups in Java and Sumatra. Java Island had 59.15 percent, the largest contribution to Indonesia’s GDP, followed by Sumatra 21.14 percent, and Kalimantan 7.95 percent. Meanwhile, Sulawesi with a contribution of 6.43 percent has the highest growth rate.

Previously, finance minister Sri Mulyani Indrawati projected the growth to be stagnant at the level of 5.05 percent. She hopes that growth in household consumption will still be around 5 percent. The ballast of the growth, the minister noted, comes from export and investment growth.

Some analysts viewed, the Indonesian economy only grew 5.01 percent in the 3Q of 2019 from last year 5.17 percent. The prediction fromJPMorgan Chase and Deutsche Bank lower, the nation’s economy only to grow 4.9 percent and 4.8 percent, respectively.

The governor of Bank Indonesia (BI) said will preparing various strategies to get out of the adverse effects of the unconducive global economic conditions. With this strategy, its expected could drive economic growth and reached this year’s target 5.1 percent.

He asserted countries in the world are currently facing various challenges due to the global economic situation. The continuing trade war between the United States (US) and China, the increased risk of Brexit and other geopolitical risks causes global economic growth slow.

As reported, many countries are currently implementing dovish policies, or low-interest rates and continuing to add liquidity to boost their economy. These cause a high-risk premium and bring volatility to the foreign capital flows and the exchange rate.

In reducing the adverse effects of the technology, said Warjiyo, BI would accelerate financial inclusion with the digital economy, but accompanied by increased risk management such as increasing consumer protection, anti-money laundering, and cyber risk.

In facing these challenges, Warjiyo explained, the central bank will implement the policy mix, between monetary and macro-prudential, through lower interest rates and property relaxation. BI also encourages digital payment service programs in 2020.

He also proposed to the government to find new sources of economic growth in the tourism, medium, and small-medium enterprises, digital finance, maritime, and manufacturing sectors, which include automotive, textiles, and electronics. The next focus of BI, he adds, is to carry out economic transformation through cutting investment permits, specifically for new sources of growth.

Besides, he went on, the country needs to established bilateral or regional cooperation to drive the export, investment by looking for new markets, especially in Africa. He believed, the steps will be able to strengthen the source of growth from abroad. Finally, strengthening regional resilience in Asia.

With these various strategies, coupled with low inflation trends, a stable exchange rate, and current account deficit, the Indonesian economy can grow 5.05 percent by the end of this year. While next year it can approach 5.3 percent with various policy synergies, he concluded.

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