Indonesia’s Economy Shows Real Signs of Acceleration

  • Economic data released so far in 2018 shows a pick-up in the growth of Indonesia’s economy.
  • The government collected more taxes in the 1Q18 than it did in the same period in 2017, while the growing number of capital goods and raw materials suggest bustling investment and manufacturing activities. Motorcycle sales expanded at their quickest rate in four years in 4Q17, as purchasing power recovered across the country, in line with rising prices of the country’s main commodities like coal and palm oil.
  • Finance Minister Sri Mulyani Indrawati said she estimates gross domestic product (GDP) to expand by 5.2% in 1Q18, which would be the country’s fastest expansion in the last four years.
  • The World Bank and the Asian Development Bank both expect the largest economy in Southeast Asia to expand by 5.3% in 2018, picking up from a near 5% pace in the past four years.
  • Taxes and excises revenue jumped 10% to IDR262.4tr in 1Q18 from IDR237.9tr in 1Q17.
  • “The revenue shows encouraging growth as it also shows that our economic pulse is beginning to increase,” Sri Mulyani said at a press conference in Jakarta.
  • “The government will continue to maintain this momentum, which I would say is on the right track.”
  • The main source of the increase in tax revenue was attributed to Indonesia’s commodities sector, which experienced price rebounds in 2017.
  • A survey by Indonesia’s central bank, Bank Indonesia, showed that the Consumer Confidence Index (CCI) in Mar 18 was 121.6, still above the minimum confidence level of 100.
  • President Joko “Jokowi” Widodo, who is up for re-election in 2019, went as far as reversing his policy in fuel subsidies to ensure cheap fuel and electricity until the end of 2019 and to support consumer purchasing power.
  • “Household consumption is expected to grow faster in 2018, as there will be momentum to boost it, such as regional elections and the Asian Games,” said Mohammad Faisal, an economist at Jakarta-based research firm Center of Reform on Economics Indonesia.
  • Several indicators in investment increases, such as imports of capital goods and raw materials, have also risen.
  • In 2018, the government will not hold back in spending on social assistance and on civil servants, who have not seen pay raises since 2016. The government hopes that it can help boost consumption ahead of Lebaran and the beginning of the school year in Jul 18.
  • “We hope there will be no [further external] shocks to help us maintain the momentum of the growing economy,” Sri Mulyani said.

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