BI revises down Indonesia’s growth estimates due to budget cuts. Despite robust economic growth in the second quarter, Bank Indonesia (BI) has revised down its projection on the country’s economic growth to 4.9 to 5.3 percent for this year, a slight decrease than the previous estimate of 5 to 5.4 percent.
The pessimistic target was set after the government revised this year’s state budget with Rp 133 trillion (US$984 million) expenditure cuts, leading to lower government spending in the second semester.
“The budget cuts in the second semester are likely to lower economic growth this year […] We estimate the economy will grow around 5 percent in the third and fourth quarters,” BI governor Agus Martowardojo said in Jakarta on Friday.
According to him, the government’s investment and consumption had played a significant role to help stimulate the economy, as shown in the first semester’s growth. Thus, a cut in government expenditure in the second semester would directly affect growth in the next semester.
BI deputy governor Perry Warjiyo added the persistent sloth in the global economy had also impacted the central bank’s projection, as a result of post-Brexit uncertainty and limited growth in the US and China.
“In general, we estimate the global economy to only grow 3.1 percent this year and 3.2 percent next year. Previously, we estimated that it would grow 3.3 percent to 3.4 percent,” he explained. (ags)