The Indonesian government has revised downward its forecast for national economic growth in 2017 to the range of 5.3% to 5.7% year-on-year, according to Finance Minister Bambang Brodjonegoro.
On May 20, Bambang informed legislators at a plenary session on the 2017 fiscal budget about the change in the growth outlook. Initially, the government had projected Indonesia’s gross domestic product (GDP) growth next year to range from 5.5% to 5.9%.
“The country’s economy is expected to grow with improvement in the global economic condition, realization of infrastructure projects and the success in maintaining purchasing power of the people,” the minister said, as reported by Antara News.
The scaled-down assumptions were based on the country’s limited production capacity, weak competitiveness as a result of inadequate infrastructure, underdeveloped human resources, insufficient technological innovation, and gaps in food security, he added.
“In addition, the role of the financial sector in the country is still shallow in supporting economic growth and the cost of fund is still high,” he said.
The assumptions on macroeconomic indicators as set down by the government will be the basis for drafting the 2017 fiscal policy and state budget, Bambang said.
The minister continued that Indonesia is expected to face a host of challenges to effective fiscal management come 2017, such as narrow fiscal room to support priority productive spending, uneven distribution of subsidy, and rising government expenditure.
“The government, therefore, is seeking to bring to reality healthy and sustainable fiscal policy through improvement of productivity of the state budget and efficiency in budget allocation, strengthening fiscal resistance, etc.,” he said.
Bambang said government spending in 2017 will focus on four areas: transportation and logistics infrastructure development; bureaucratic reforms; social protection; and fiscal decentralization to strengthen local governance.
Regarding economic growth in 2016, he is optimistic of achieving the 5.3% growth target despite a slightly disappointing GDP growth of 4.92% year-on-year in the first quarter of 2016.
Indonesia’s central bank, Bank Indonesia, which left its interest rate policy unchanged at the May policy meeting last week, trimmed its forecast for Indonesia’s GDP growth in full-year 2016 to the range of 5% to 5.4% from 5.2% to 5.6% previously.
Photo: Gunawan Kartapranata
