Third Quarter May See over 5% Economic Growth: Economist

TEMPO.CO, Jakarta - An economist from Standard Chartered Bank, Eric Sugandi, has predicted that Indonesian economy may grow more than 5 percent in the third quarter, if the government realizes budget expenditure optimally.

"The realization of government programs will fuel the economy by creating employment opportunities. This will help to restore peoples consumption," he said when asked to comment on the subject on Tuesday. 

In the first semester, Sugandi added, both private and household domestic consumption were low.

If the governments plan to expedite the execution of its programs and infrastructure projects is realized in the second semester, he estimated that the economic growth will be in the range of 5.0 to 5.2 percent in the third and fourth quarters.

He also pointed out that the allocation of as much as Rp290.3 trillion as capital expenditure for infrastructural development in the next five years in the revised 2015 budget should contribute significantly to GDP growth.

However, the sluggish materialization of government spending till the end of the first semester will reduce the contribution of infrastructure-related improvements to the economy, the economist stated.

Although the government believes that 90 percent of the capital spending will be realized this year, Sugandi doubts it will affect the governments growth target of 5.7 percent, which was set based on assumptions in the revised 2015 budget.

Moreover, he also predicted that Indonesias economy will grow 4.9 percent in 2015.

"Regretfully, it is too late to optimize budget spending for infrastructural growth," he remarked.

On economic growth in the second quarter, Sugandi admitted there had been no positive achievements, besides the slight improvement in export performance. 

He added that the situation was worsened by the publics weak purchasing power.

"The retail market and the sale of motor vehicles continue to show weak signs," he observed.

In the third quarter, Sugandi predicted economic growth of only 4.8 percent, which would be a marginal rise from the 4.71 percent recorded in the first quarter.

He further noted that indications of weak demand were also evident in the decreasing rate of import of raw materials and capital goods, despite the fact that Indonesia witnessed a trend of high consumption in the month of Ramadan and before the festival of Eid.

During this holiday season, businesses should have multiplied their production to meet the expected increase in public demand.

"So what happened to consumption? We have yet to replace imported capital goods and raw materials, but it continues to drop," he affirmed.

ANTARA | INDRA ARIEF PRIBADI