Despite Higher Idul Fitri Consumption, Indonesia May Not Reach GDP Target
Although the holy fasting month of Ramadan and subsequent Idul Fitri celebrations always provide a boost for national economic growth in Indonesia as domestic consumption tends to peak, analysts believe that it will not contribute significantly to the government's 6.3 percent GDP growth target this year. During Ramadan and Idul Fitri (known as Lebaran), Indonesian consumers generally spend more on food products, clothes, shoes, tickets for transport and hotels than in other months, and thus lead to increased economic activity.
In order to meet this year's GDP growth target, it will be important to attract investments (both domestic and foreign) as well as increase international trade. However, both these components have suffered under the prolonged global economic crisis. In this context, it becomes even more important for the Indonesian government to optimize government spending, particularly capital expenditure, in order to offset the negative impact of global economic turmoil.
Credit card transactions increased almost 100 percent during Idul Fitri (the second week of August) as people do more shopping, according to Kostaman Thayib, Director of Bank Mega as quoted in newspaper Bisnis Indonesia. During Ramadan (in July) credit card transactions also showed a sharp increase. Next month, Indonesia's central bank will release official data regarding July's credit card transactions. In June 2013, a total of 19.59 million credit card transactions were conducted worth of IDR 18.18 trillion (USD $1.78 billion). In June 2012, 18.23 million credit card transactions were conducted worth of IDR 16.88 trillion (USD $1.65 billion), even though the total number of credit cards that circulate in Indonesia fell to 14.7 million in June 2013 from 15.42 million one year earlier (because of the introduction of stricter regulations). Indonesia's total population currently exceeds 240 million people, implying that credit card penetration (as well as other banking services) still has ample room for growth.
Usually, credit card transactions in Indonesia increase about 20 to 25 percent during Idul Fitri compared to the previous month.
In total, domestic consumption accounts for about 55 percent of Indonesia's national economic growth. Due to recent higher inflation (a consequence of the increase in prices of subsidized fuels last June), Indonesia's domestic consumption is expected to weaken slightly. In July 2013, Indonesia's inflation rate (year on year) stood at 8.61 percent.