JAKARTA: Indonesia’s gross domestic product grew 5.02% on the year in the July-September quarter, preliminary data shows. That is slightly off the 5.19% pace in the April-June quarter, largely due to tepid government spending.
The latest quarterly figure, released on Nov. 7 by Statistics Indonesia, did beat forecasts that expansion would fall short of 5%, thanks to stronger-than-expected consumption.
The administration of President Joko Widodo aims to fuel further growth by stepping up infrastructure development, driven by both the public and private sectors. But in late October, Finance Minister Sri Mulyani Indrawati downgraded the growth forecast for all of 2016 from 5.2% to about 5%. The slowdown is primarily attributable to delayed fiscal outlays on public works and other pursuits, with July-September government spending having dropped 2.97% on the year.
The administration has been juggling the infrastructure plan with a push to improve the nation’s fiscal health, under Indrawati’s stewardship. Suffering from chronic shortfalls in tax revenue, the government substantially cut its spending for fiscal 2016. Things are looking up, however.
In an effort to drum up more revenue, the government in mid-July introduced a tax amnesty program. Taxpayers who come clean about undeclared assets at home and abroad, and pay several percent of the value of those assets, are exempted from financial penalties and criminal charges.
As a result, the government had 97 trillion rupiah ($7.42 billion) worth of additional tax revenue as of the end of September. The Widodo administration intends to use these funds to accelerate infrastructure development from the October-December quarter onward.
Consumer spending, meanwhile, is relatively steady. Statistics from Bank Indonesia, the central bank, show retailers’ sales in July grew 6.7% on the year. Consumption was constrained by the Islamic fasting month of Ramadan, which ran into early July. Since August, sales have been rising at a faster rate.
Brisk auto sales have a lot to do with the consumption increase. Japanese cars such as Daihatsu Motor’s seven-seat budget Sigra, released in August, and Toyota Motor’s Calya, manufactured by Daihatsu, are faring especially well.
