BI REVISES GROWTH FOR 2015, SETS NEW ONE FOR 2016

by Andi Abdussalam

Jakarta, May 29 (Antara) -- Bank Indonesia (BI) has estimated Indonesia's economic growth in 2016 to be within the range of 5.4 to 5.8 percent.          This range is similar to its earlier prediction for 2015, which has been revised down to 5.1 percent.          Previously, the central bank set Indonesia's economic growth at a range of 5.4 to 5.8 percent for 2015 but later revised it down to 5.1 percent. It has now predicted growth of 5.4 to 5.8 percent for 2016.          Last week, BI said it would maintain its growth forecast at 5.4 percent but would see later whether it needed to be revised.          "BI is of the view that the country's economic growth this year will at least be at the lower limit of its 5.4 to 5.8 percent prediction. However, the bank will wait and watch whether it needs to review the figures in the second quarter of 2015," BI Governor Agus D. W. Martowardojo stated last week (May 20).         The BI revised down its previous prediction of 5.4 percent (lower limit) to 5.1 percent on Thursday.         "In 2015, Bank Indonesia predicts that Indonesia's economic growth will reach 5.1 percent, which is still better than that in 2014 (5.0 percent)," Martowardojo said here on Thursday.         At the same time, BI also set its projection of economic growth at a range of 5.4 to 5.8 percent year-on-year (yoy) for 2016.           "We predict that the Indonesian economy in 2016 will grow at a range of 5.4 to 5.8 percent, higher than our revised growth rate of 5.1 percent for 2015," he affirmed at a hearing with the Budgetary Body of the House of Representatives (DPR) on Thursday.         He is optimistic that economic growth will recover in 2016 based on predictions that the global economy, particularly those of advanced countries, will improve and reach 3.8 percent, higher than the 3.4 percent forecast for 2015.         "Improved world economic growth will have positive impacts on the prices of commodities," Martowardojo pointed out, adding that it is expected to boost Indonesia's exports in 2016.         In addition, the prospect of national economic improvement in 2016 will also be fueled by increasing domestic demand for consumption and investment. "Increase in household consumption will be boosted by people's improved purchasing power, supported by controllable inflation at 4, plus/minus 1, percent," he remarked.         Regarding the economic growth estimation for this year, the Development Bank of Singapore (DBS) believes that Indonesia's economic growth in the second quarter could reach 5.1 percent. This will be an improvement from the 4.71 percent recorded in the first quarter of 2015.         "The growth from 4.7 percent in the first quarter to 5.1 percent in the second will be due to better development. However, spending will not be too different," an economist of DBS Group Research, Gundy Cahyadi, said on Wednesday.          Cahyadi added that the economic slowdown at present indicated that the government needed to boost budget absorption for development programs. "Budget should be disbursed soon, but it must continue to exercise caution. This means implementation of projects must get priority," he explained.         Infrastructure projects for 2015 had been targeted to be started from last April, but until now, they have not been progressing as expected. "Implementing the projects is important. There are many foreign investors interested in them, including those from China and Japan," Cahyadi pointed out.         Referring to BI's previous growth prediction of 5.4 to 5.8 percent for 2015, the DBS economist remarked that the central bank's forecast was too optimistic because the economy at home, as well as globally, was slowing down.         "So the 5.4 percent prediction is a little too high. After all, the economic growth was declining in the first quarter (at only 4.71 percent)," he said during a discussion on "India VS Indonesia Taper Tantrums Analysis" on Wednesday.          Cahyadi noted that it would be difficult to achieve economic growth of 5.4 percent because the economy was witnessing a downward trend. Therefore, he predicted that Indonesia's growth in 2015 will be at 5.1 percent.          He saw that BI's earlier forecast at 5.4 percent was too optimistic. However, the bank revised it down on Thursday to 5.1 percent     After it was recorded at 4.7 percent in the first quarter, the central bank estimated that Indonesia's economic growth in the second, third and fourth quarters will reach 4.9 percent yoy, 5.3 percent yoy and 5.4 percent yoy, respectively, BI Governor Martowadojo said.          The increase in economic growth in the second quarter of 2015 is expected to be boosted by the government's consumption and development investment, in line with the implementation of its investment projects.          Regarding external factors, the rise in the growth will be driven by export performance, which has begun to see a positive trend.          "The improvement in economic performance in the third and fourth quarters of 2015 will be generated by rise in consumption and investment, in line with the increase in the government's budget realization and credit extension by the banking sector," Martowardojo explained.          According to the BI governor, a surge in the realization of the government's infrastructure projects will boost construction investment in the second semester of 2015.          In addition, the expansion of banking credits, in line with the slackening of BI's macro-prudential policy, is expected to spur private sector investment.          With regard to external factors, he noted, exports will increase gradually and, in turn, improve economic performance in the second semester of 2015.         "Exports are predicted to improve gradually with the improving global economy. However, the potential of exports to improve could still be hampered by low commodity prices, low oil price and low demand from China," Martowardojo remarked.          Furthermore, an observer of economic affairs from the University of Widya Mandira (Unwira) in Kupang, East Nusa Tenggara, Thomas Ola Langoday, affirmed that there is no major cause for concern as growth is expected to be stronger the rest of the year, with the possibility of reaching well above 5.0 percent the entire year.     "There is no need to harbor much concern as economic growth at the end of 2015 could still reach 5.0 percent in accordance with BI's prediction, even though the economy in the first quarter grew only 4.6 percent," the academician noted.      He believes that growth at the end of the year could reach 5.3 percent.          "As the government is expediting the development of infrastructure projects in the second quarter of this year, the economy will grow faster to exceed the 5 percent level," Langoday stressed.     ***3*** (T.A014/INE) EDITED BY INE (T.A014/A/BESSR/A. Abdussalam) 29-05-2015 20:33: