Indonesia's Economic Growth in Q2-2013 Projected at Six Percent
The slowing pace of investments has made the Indonesian government decide to revise down its forecast for economic growth in the second quarter of 2013. Minister of Finance, M. Chatib Basri, believes that GDP growth will not exceed the six percent threshold in Q2-2013. He explained that there are a number of factors that refrain the government from setting a higher growth assumption. These factors include ailing exports, non-optimal government spending, and diminishing gross fixed capital investment.
Moreover, Indonesia's economic growth in Q1-2013 only reached 6.02 percent, a disappointing figure for Southeast Asia's largest economy. This also makes the government less optimistic regarding second quarter results. "Having seen Q1-2013 results, growth in Q2-2013 is likely to be at six percent. It will be hard to reach beyond the six percent mark. In fact, growing six percent alone needs a lot of extra effort." said Chatib on Tuesday (04/06).
According to data released by Statistics Indonesia (BPS), gross fixed capital investment only grew 5.9 percent (YoY) in Q1-2013, which is the lowest pace in three years. It also represents a sharp fall compared to first quarter results in previous years:
Gross Fixed Capital Investment
| Growth | |
| Quarter 1 - 2013 | 5.90% |
| Quarter 1 - 2012 | 9.97% |
| Quarter 1 - 2011 | 7.25% |
| Quarter 1 - 2010 | 7.95% |
Source: Statistics Indonesia (BPS)
The Decline in gross fixed capital investment is actually not a surprise. It had been known to diminish as imports of capital goods have been falling since November 2012. In October 2012, USD $3.30 billion of capital goods were imported into Indonesia. This figure then fell for five consecutive months until April 2013 when an improvement was witnessed.
Value Import of Capital Goods
| Value (USD billion) |
|
| April 2013 | 2.60 |
| March 2013 | 2.53 |
| February 2013 | 2.56 |
| January 2013 |
2.61 |
| December 2012 | 3.02 |
| November 2012 | 3.26 |
| October 2012 | 3.30 |
Source: Statistics Indonesia (BPS)
With slowing investments, exports and non-optimal government spending, it seems that Indonesia can only rely on household consumption to spur economic growth.
Q2 growth that falls below Q1 growth is also worrying because it forms a break with Indonesia's traditional economic growth pattern. Usually, the second quarter posts an increase in growth compared to the first quarter. If we take a look at the period 2007 to 2012, Indonesia's GDP growth always accelerated in the second quarter (except for 2009). In fact, in the last two years growth in the second quarter was the highest quarterly growth rate of the year.
The House of Representatives (DPR) questions the government's pessimistic stance on economic growth in Q2-2013 and would like to see it revised upwards. Particularly, because in Q2-2013 preparations for the holy fasting month (Ramadhan) and subsequent Idul Fitri celebrations will start, which usually trigger increased household consumption.
Economic Growth 2007-2012 (percentage)
| Year | Quarter I |
Quarter II | Quarter III | Quarter IV |
| 2012 | 6.29 | 6.36 | 6.16 | 6.11 |
| 2011 | 6.45 | 6.52 | 6.49 | 6.50 |
| 2010 | 5.99 | 6.29 | 5.81 | 6.81 |
| 2009 | 4.60 | 4.37 | 4.31 | 4.58 |
| 2008 | 2.41 | 2.77 | 3.74 | -3.57 |
| 2007 | 2.00 | 2.40 | 3.90 | -2.10 |
Source: Statistics Indonesia (BPS)