ECONOMIC GROWTH SLOWS: Infrastructure Spending Boosted

May 6, 2015, Bisnis Indonesia, Page 1, Section: Front Page News

JAKARTA – The government has promised the acceleration of its expenditures, especially those related to infrastructure, in order to drive up growth again, after it has slowed sharply at the beginning of this year.

Acting Head of Fiscal Policy Agency (BKF) of the Ministry of Finance, Suahasil Nazara, has asked all the government’s ministries / agencies to speed up spending.

This is in view that the government has been the only growth energy [left] amid the fall in exports and a slowdown in household consumption “We still hope the Indonesian economy could grow higher in second quarter of 2015 and beyond, driven by government spending.”he said, Tuesday (5 May)

As is known, infrastructure expenditure of the government contributes up to 45.64 percent to the growth of national gross domestic product.

Central Bureau of Statistic (BPS) announced that economic growth in the first quarter of 2015 was only at 4.71 percent, much lower than the rate of the same period last year, at 5.14 percent. The achievement is at the same time continuing a slow-down trend occurring since the third quarter of 2012.

Contraction in exports and consumption by non-profit institutions serving households (LNPRT) was recorded at 0.53 percent and 8.23 percent, respectively, slowing down the rate of GDP. A year ago, LNPRT soared 23.66 percent due to the general elections, while export recorded a sluggish growth rate of 3.16 percent.

Head of BPS, Suryamin, revealed there are three things that have generally caused the economic slowdown in the first three months of this year.

First, a number of countries that are trading partners of Indonesia are experiencing economic slowdown. For example, China has revised its growth forecast from 7.4 percent to seven percent. In fact, this Panda Country has a nine percent – 10 percent share of Indonesian exports.

Second, the weakening world prices of oil have affected commodity prices. In fact, Indonesian exports still rely on commodities.

Third, export and import activities from January to March declined from the position in the same period last year. Throughout January – March exports fell 11.7 percent from the same period last year. At the same time, imports fell 15 percent.

In response to the economic slowdown in the first quarter of 2015, the rupiah’s exchange rate movement has again slumped past the psychological level of Rp 13,000. The rupiah has perched on the Rp 13,061 level.

On the other hand, after suffering a decline throughout last week, the composite stock price index (IHSG) on the first two days of this week was green. Yesterday, IHSG rose 0.37 percent to the position of 5,160.3.

In addition to boosting expenditure, Coordinating Minister for Economic Affairs, Sofyan Djalil, revealed that the government’s first target is to intensify exports to non-traditional markets, such as India, the Middle East, Turkey and Iran. “In two weeks’ time, I will go to Iran and the non-traditional markets,” he said, Tuesday (5 May).

He explained that the government will re-activate frozen partnerships, such as with Europe and Turkey.

In addition, the government will loosen its provisions regarding domestically produced goods for companies in bonded zones and also plan to build bonded warehouses to attract capital goods, such as cotton and pipes, which all this time have been kept abroad.

Sofyan also expressed hope that the regulation on income tax deduction facility, or tax allowance, which becomes effective today (6 May), will again encourage investments in the manufacturing sector.

As is known, today, Government Regulation (PP) No. 18/2015 regarding Income Tax Facilities for Investments in Certain Business Fields and/or in Certain Regions, which replaces PP No. 52/2011, has come into effect.

However, economist from Center of Reform on Economics Indonesia, Akhmad Akbar Susamto, said that, based on existing experiences, the tax allowance facility has not been utilised well by business actors.

Moreover, the economic slowdown in the first quarter of 2015, which registered a growth rate of 4.7 percent, is expected to continue because at the beginning of the second quarter – precisely as of 30 April – tax revenues from the VAT and luxury sales tax (PPnBM) remained weak.

In the report of Directorate General of Taxation yesterday (5 May), actual tax receipts as per the end of April was recorded at Rp 113.32 trillion, down 5.25 percent from the achievement of the same period last year, which was Rp 117.49 trillion. (Arys Aditya/Kurniawan A. Wicaksono/David Eka I./Gloria N. Dolorosa/ Riendy Astria/Surya Rianto)

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