Sluggish RI economy due to limited government spending: BI

Lower inflation – A woman buys vegetables at a kiosk in a traditional market in Jakarta recently. Bank Indonesia (BI) said on Wednesday that controlled inflation would improve Indonesia’s household consumption in the second quarter of 2016. 

Indonesia’s slow pace of economic growth in the first quarter of 2016 is mainly due to the limited growth in both government spending and investment, a Bank Indonesia ( BI ) official has said.

Indonesia's economy recorded 4.92 percent growth in the first quarter of 2016, lower than the country’s growth in the previous quarter, which stood at 5.04 percent. However, the economic growth in the first three months of 2016 was higher than the same period last year.

"The weak government spending is influenced by the seasonal pattern of government spending, which is still relatively limited at the beginning of the year," the central bank’s executive director of communication Tirta Segara said on Wednesday.

He said private investors were in wait-and-see  mode, despite the government's efforts to speed up infrastructure projects. He further explained consumer spending was still growing strongly supported by basic food prices, which remained stable.

On the external side, Tirta said, along with improvements in some export commodities, Indonesia’s overall export performance had improved although it was still experiencing a contraction phase.

"Looking ahead, BI predicts economic growth in the second quarter of 2016 will rise, driven by the fiscal stimulus, particularly with respect to accelerating the development of infrastructure projects," he went on.

Meanwhile, consumer spending is also expected to improve, in line with controlled inflation and rising earnings expectations. Along with that, the implementation of the economic policy packages is expected to boost investment and exports.

Tirta said it was expected that the easing of Indonesia’s monetary policy, which had been pursued consistently, could boost economic growth.

He also said BI would continue to monitor developments, both domestically and externally. At the same time, the central bank would continuously strengthen coordination with the government to continue to boost economic growth, while it would continue to maintain the country’s macroeconomic stability.

"With the macroeconomic stability, Indonesia's economy will grow at a higher rate on an ongoing basis," he said.