Economy only grows by 0.52% amid weak exports, investment
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."
Eye-box
Growth of GDP components in Q2 (%)
----------------------------------------------------------
quarter-on-quarter year-on-year
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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
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Source: BPS