Indonesia: BI warns of potential risks to growth – 8 Aug 2017

  • The Indonesian Central Bank (BI) has warned of potential risk that could hinder the prospect of economic growth for the second semester of 2017, especially with domestic demand that has yet to recover.
  • “This is related to domestic demand that has yet to be strengthened, with the continued reconciliation process of corporate and banking,” BIs executive director for communication department Agusman said in a statement here on 7 Aug 17.
  • BI saw that economic growth in the second quarter of 2017 at 5.01% y/y has reflected a continued process of economic recovery but was still below expectation. The growth was lower than 5.18% of economic growth during the same period of 2016 and same as 1Q17’s figure.
  • Agusman noted that the economic growth in 2Q17 was supported by a sharp increase in building and non-building investment. Building investment is driven by the intense development of government infrastructure as well as private sectors construction.
  • Non-building investment has continued to increase following the increase in price of commodities. According to Agusman, household consumption in 2Q17 could be maintained with the momentum of Eid al-Fitr, but the state consumption has dwindled due to the change in budget expenditure.
  • Export growth has also slowed due to pressure in manufacture sector, with the insignificant economic recovery in developed countries. “In the future, economic growth is expected to improve, propped up by the increase in export and investment, with improvement in 2H17,” he remarked.
  • BI has still maintained the prospect of economic growth in 2017 at 5.0 – 5.4%.

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