Indonesia' finance minister, Sri Mulyani Indrawati, sees economic growth in the second quarter (2q) of 2019 estimated to be in the range of 5.02-5.13 percent. Photo: Finance Ministry.

JAKARTA (TheInsiderStories) – Indonesia’ finance minister, Sri Mulyani Indrawati, sees economic growth in the second quarter (2q) of 2019 estimated to be in the range of 5.02-5.13 percent, grew 5.07 percent from the previous quarter of 5.10 percent, the minister said in Jakarta today (06/12).

“Such growth is strengthened by the assessment of credit rating agency Standard & Poor’s which raised Indonesia’s rating from BBB- to BBB with a stable outlook on May 31,” Indrawati said.

Meanwhile, Southeast Asia’s largest economic stability remained under control amid the turbulence of the world economy, with the May inflation rate of 3.32 percent. The low inflation rate is believed to maintain the level of public consumption.

Furthermore, the realization of state revenues and grants until the end of May reached Rp728.45 trillion (US$1.04 billion) or 33.64 percent of the 2019 state budget target. The realization showed a positive trend with growth of 6.2 percent (YoY) compared to the same period last year, jumping from April’ growth which is only 0.5 percent (YoY).

“The surge is influenced by the positive economic conditions accompanied by a cycle of business activities that are influenced by the momentum of the big day,” Indrawati said.

In detail, the realization of tax revenues until the end of May reached Rp496.65 trillion or 31.48 percent of the 2019 state budget target, growing 2.43 percent (YoY). The tax revenue performance was mainly supported by income tax which was influenced by the improvement in the country’s employment conditions.

At the beginning of 2019, the open unemployment rate was 5.01 percent, down from the previous period which reached 5.13 percent. The income tax performance was also driven by the absorption of goods expenditure which grew by 16.89 percent (YoY) as well as the positive trend in increasing the compliance of individual taxpayers after the annual tax return.

The realization of customs and excise revenues up to the end of May 2019 reached Rp72.67 trillion or 34.80 percent of the 2019 state budget target, growing 35.11 percent (YoY). Performance improvements in customs and excise revenues were mainly sustained by the receipt of tobacco excise and excise on beverages containing ethyl alcohol, which grew by 60.17 percent (YoY) and 27.79 percent (YoY) respectively.

The growth is the impact of the relaxation policy for repayment of excise ribbon orders, no increase in tariffs on excise on tobacco products in 2019, and the success of excise control is at high risk in reducing the circulation of tobacco and illegal alcoholic beverages.

Meanwhile, the realization of non-tax state revenues up to May 31 reached Rp158.82 trillion or 41.88 percent of the 2019 state budget target. The realization grew 8.61 percent (YoY) compared to the same period the previous year, a significant increase from negative 14.8 percent April’s performance.

Indrawati said the government is committed to continually improving the quality of the management of the state budget by improving spending absorption patterns. Realization of state expenditures up to the end of May was Rp855.90 trillion or 34.78 percent of the 2019 state budget target, an increase of 9.80 percent (YoY).

The realization included government expenditures and transfers to regions and village funds which each reached Rp530.81 trillion (32.48 percent of the state budget ceiling) and Rp325.10 trillion (39.32 percent of the state budget ceiling). Whereas central government expenditures up to May increased by 15.90 percent (YoY), higher than the realization at the end of April 2019, which was 11.8 percent (YoY).

The increase was caused by personnel expenditure, goods expenditure, and social assistance spending which boosted government consumption in gross domestic product (GDP), mainly influenced by the realization of social assistance spending which had reached Rp60.33 trillion (59.11 percent of the ceiling) or increased amounting to 53.70 percent (YoY) compared to the previous year.

While in terms of investment, the role of government capital expenditure has contributed to the growth of gross fixed capital participation which reached 5.7 percent in Q2 of 2019, higher than the previous semester of 5.03 percent.

Realization of transfers to regions and village funds until May 2019 reached Rp325.10 trillion or 39.32 percent of the ceiling of the 2019 state budget. In detail, the realization of transfers to regions up to May was higher by Rp3.81 trillion or around 1.27 percent (YoY).

The sustainability of the fiscal year 2019 is expected to be maintained, with the realization of the state budget deficit to May reaching Rp127.45 trillion or 0.79 percent of GDP, far below the mandated threshold of law, which is 3.0 percent of GDP.

Meanwhile, the primary balance in May was at a negative position of Rp0.38 trillion. The financing realization carried out by the government until May reached Rp157.89 trillion, originating from debt financing amounting to Rp159.63 trillion. The debt financing covers the issuance of government securities amounting to Rp186.04 trillion and loans amounting to negative Rp26.41 trillion.

To keep cash conditions secure, the government consistently conducts debt management prudently and productively, among others by maintaining debt ratios within safe limits, increasing efficiency over debt management, encouraging debt utilization for productive activities, and maintaining a balance of debt management.

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