Former KPK senior investigator Novel Baswedan. (Antara Photo/Putra)

Bank Indonesia Sees Growth Picking Up in Q2 on Higher State Spending


MAY 05, 2015

Jakarta. Indonesia’s economy will start to pick up in the second quarter as government spending is expected to be higher, Bank Indonesia said in a statement on Tuesday, following a report that showed first-quarter growth was the slowest in more than five years.

Gross domestic product rose 4.71 percent in the January-March period from the same quarter in 2014, the Central Statistics Agency (BPS) reported, as exports weakened and the rupiah declined. Growth slowed from 5.01 percent in the fourth quarter of last year and was the weakest since the 4.12 percent pace in the third quarter of 2009.

“Government spending will become a stimulus for economic growth. Investment growth is also expected to be higher in the second quarter and afterwards as government spending will also be higher for infrastructure projects,” said Tirta Segara, an executive director at Bank Indonesia.

Tirta said, though, that the central bank is aware of the risk that economic growth may reach the lower end of the target of 5.4 percent to 5.8 percent.

“The scale and the speed of infrastructure project realizations will determine the possibility of reaching the government’s target, along with strong consumption and gradually better export,” he said.

Ryan Kiryanto, chief economist at state-controlled Bank Negara Indonesia, also called on the urgency of the government in fast-tracking spending on infrastructure projects in order to boost economic growth.

“The government needs to accelerate the [government] spending, infrastructure development, fiscal incentives for investors,” he said. “The government also needs to stop itself from making a decision that is unfriendly to the market — such as higher income tax. Let the ministers figure a way out.”

President Joko Widodo has set a target of economic growth returning to the 7 percent pace.