Economic Growth Indonesia Expected
to Slow in First Quarter of 2018
Indonesian Coordinating Minister for Economic
Affairs Darmin Nasution said he expects Indonesia's economic growth to slow in
the first quarter of 2018 as the peak of the nation's big harvest is expected
to occur in the second quarter this year. Meanwhile, credit growth has remained
bleak in Indonesia.
The shift of Indonesia's big harvest to a later
period also means that the Indonesian government will have to carefully monitor
price movements of agricultural products and respond immediately before
inflation peaks for example by allowing more imports of certain products. Nasution
added that the contribution of the agriculture sector to Indonesia's GDP will
be somewhat undermined in the first quarter of 2018 due to the different timing
of the big harvest period.
Indonesia’s central bank had been cutting rates
since the beginning of 2016 in a bid to spur growth in Southeast Asia’s biggest
economy. While consumer spending has been sluggish, growth was supported last
year by a pick up in exports.
Meanwhile, Nasution is pessimistic about credit
growth in Indonesia in 2018. While the central bank targets to see a rebound
from a credit growth pace of 8.3 percent in 2017 to the range of 10-12 percent
in 2018, Nasution expects to see a similar growth pace as seen in 2017. Last
week Indonesian President Joko Widodo had gathered key directors and
commissioners of four state-owned banks, 27 regional development banks, 75
private banks, and eight branches of foreign banks at the Presidential Palace
in Jakarta and urged them to leave their "comfort zone" and become more willing
to boost credit growth even though it would come at the risk of
rising non-performing loans and a lower capital adequacy ratio, both of which
are at safe levels currently. Rising credit growth would boost economic
activity, hence helping Indonesia to reach the government's GDP growth target
of 5.4 percent in 2018. Nasution said that slow demand of loan indicates the
economy's slowing growth.
Bhima Yudhistira, economist at Indef, said
Indonesia's economic growth will ease to 4.95 percent in the first quarter of
2018 as household consumption, investment, and export are all not growing at
significant levels, while these three indicators are vital for Indonesian
economic growth. For example, the 1.8 percent drop in domestic retail sales in
January 2018 is a bad sign. This is partly caused by a delay in the
disbursement of the government's social assistance program, while food
inflation was high in January 2018.
But a positive factor is that government spending
has already reached 8.8 percent of the full-year target by February (up from
7.5 percent in the preceding year). Disbursement of government funds should
give a boost to the local economy.
Reference :
