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Indonesia's economic driver will shift to private investment in H2: Analyst
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All ready: Finance Minister Sri Mulyani Indrawati (left) and Taxation Director General Ken Dwijugeasteadi are preparing to attend a hearing, which will discuss the tax amnesty program, among other issues, at the House of Representatives on Sept. 29. (Antara Photo/Puspa Perwitasari)
W
hile economic growth in the first half of the year was driven by fiscal policy, private investment will serve as the economic driver in the second half, allowing the momentum of the country’s economic recovery to continue in 2017, an economist has said.
Mandiri Sekuritas chief economist Leo Putra Rinaldy said in the first half of this year, government spending mainly contributed to the country’s economic growth, which had consistently improved both in capital and non-capital spending.
However, he said, it was likely that the driver of economic growth would shift to the private sector in the second half, following improved business and investment confidence in the country after the return of Sri Mulyani Indrawati to the Cabinet as finance minister and her decision to adjust the revised 2016 state budget, so as to make it more credible.
"There will be shifting economic drivers in the second half, thanks to lower fiscal risk after Sri Mulyani adjusted the budget to be more sound and realistic," Leo said during a media gathering in Bandung on Friday.
He said Sri Mulyani’s decision had given positive messages to businesspeople. Previously, businesspeople were somewhat reluctant to invest because of high fiscal risks stemming from the unrealistic state revenues, he went on.
"Business confidence and investment are expected to increase as indicated by improvements in the business and consumer index," Leo said.
Mandiri Sekuritas has forecast the economy to grow by 5 percent by year-end and continuing improvement in the following year in the range of 5.1 to 5.2 percent growth. (ebf)
