Economy only grows by 0.52% amid weak exports, investment
Dadan Wijaksana, The Jakarta Post, Jakarta
The economy, as measured by gross domestic product (GDP), grew by only 0.52 percent in the second quarter of this year due to a slowdown in exports and lower investment, the Central Bureau of Statistics (BPS) said on Thursday.
BPS said in a statement that second-quarter economic growth was mainly attributable to higher consumer and government spending.
It pointed out that consumer spending grew at a higher rate of 1.16 percent in the second quarter, compared with 0.51 percent in the first, while government spending was higher, at 2.88 percent from minus 2.35 percent.
During the past year, consumer and government spending were the main source of growth in the economy as exports and investment remained in the doldrums due to various uncertainties both at home and overseas.
BPS said that while imports grew at a higher rate of 4.28 percent in the second quarter, exports were slower, at a pace of 2.09 percent. Investment also slowed down, at 1.34 percent.
"The (GDP) growth has been driven by all sectors of the economy except mining," BPS said.
The weak second-quarter economic growth is casting doubt on whether the government's 4 percent economic growth for this year can be achieved. The National Development Planning Board (Bappenas) and other independent experts have previously said that this year's growth would only be around 3 percent.
A slower economic growth would have serious consequences, including a greater number of unemployed people, which, in turn, could create various social problems.
But BPS said that second-quarter economic growth was much better when compared with the same period last year. Year-on- year growth for the quarter was 3.51 percent, which was also mainly driven by stronger domestic spending.
During the first semester of this year, the economy grew by 2.87 percent over the same period last year.
Economists, however, said that if exports and investment remained weak during the next quarters, the year-on-year growth would slow down. That is because the government's ability to spend money would become very limited as it would instead focus on how to limit spending to ensure that the state budget deficit was maintained at a safe level of 2.5 percent of GDP.
Bank Mandiri economist Martin Panggabean told The Jakarta Post that exports should now become a priority for the government in boosting growth as weakened purchasing power was likely to hurt the current spending spree.
"We can no longer rely on strong domestic consumption alone to boost growth. And as hope for (new) investment is out of the question, I think exports should be a priority," Martin said.
To do that, according to Martin, the government should pay more attention to high-end manufacturing and electronic products.
"There is still plenty of room for improvement in electronics, and maybe pulp and paper. We should pursue these as alternatives instead of focusing merely on textile and shoe products, which I consider to be sunset industries."
Continuing labor conflict and security problems, coupled with the economic slowdown in the U.S. and Japan, Indonesia's major trading partners, are hurting Indonesia's export products.
The above uncertainties are also discouraging both foreign and domestic investors from making new investments in the country.
Nevertheless, despite all the gloomy outlook, Martin was optimistic that the country remained on track to achieve a growth target of 4 percent.
"With the (year-on-year GDP growth) figure, which is higher than I expected, the government should be on track for achieving the full-year target of 4 percent," he said.
Sharing Martin's view, BPS head Sudarti Surbakti said the country's growth target was attainable "if conditions remain good."
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Growth of GDP components in Q2 (%)
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quarter-on-quarter year-on-year ----------------------------------------------------------- 1. Household spending 1.16 6.30 2. Govt spending 2.88 9.40 3. Fixed capital formation 1.34 -1.01 4. Exports 2.09 -7.09 5. Imports 4.28 -21.6 ----------------------------------------------------------- GDP 0.52 3.51 ------------------------------------------------------------ Source: BPS