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BI expects economy to grow above 5.1 percent in Q1
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A man with a pile of money in his hand passes by a banner of rupiah notes at Bank Indonesia's office in Jakarta on Jan. 26. (the jakarta post/Wienda Parwitasari)
B
ank Indonesia (BI) projects that the economy will grow between 5.1 and 5.2 percent in the first quarter of 2016 and that easing monetary policy will be more effective after the new benchmark interest rate is applied.
BI's executive director on economy and monetary policy, Juda Agung, said the government's expenditures increased significantly in the first quarter, along with the acceleration of government infrastructure projects.
“It’s going to grow around 5.1 to 5.2 percent, mostly driven by government spending. Capital expenditures jumped by 161 percent compared to first quarter of 2015," has said in Jakarta on Thursday.
However, he further said private investment had yet to increase in the first quarter. He predicted the increase in private investment would be registered in the second quarter of the year.
Tirta Segara, BI’s executive director of communications, added that household consumption would remain strong in the second quarter.
Retail sales and motor vehicles have begun to grow recently as consumer confidence continues to improve.
Meanwhile, the performance of some export commodities has also begun to show improvement, particularly in textiles, electrical equipment and passenger vehicles. In addition, Indonesia's export commodity prices, such as palm oil, rubber and tin, are on an upward trend.
"Overall, growth will improve in the second quarter, supported by increased consumption and investment," Tirta said.
On the monetary side, BI has supported the economy by slashing its key rate by 75 basis points (bps) this year. At the same time, the primary reserve replacement ratio (GWM) has been cut by 150 bps.
However, the policy was ineffective in lowering interest rates on deposits and loans. "As of January to March, the deposit rate decreased by 37 basis points while the lending rate fell by 13 basis points," Juda said. (ags)
