O

ne really bad piece of news most mainstream media (except yours truly) failed to highlight this week is that the economy slowed down in the first quarter of 2013. The 6.02 percent rise in gross domestic product (GDP) between January and March may seem respectable by global standards, but it is the trend that is cause for concern.

It is the slowest quarterly growth in the last two years and the downward trend is likely to continue into the year. Coordinating Economic Minister and acting finance minister Hatta Rajasa said the government would have to revise downward growth targets from the 6.8 percent stated in the 2013 state budget.

Investment Coordinating Board chief Chatib Basrie also predicts that investment will slow down during the remainder of the year.

With this somewhat bleak outlook, it raises the question of what the government is doing about it? What does it take to reverse the trend and how long do we have to wait before that happens? What does it mean in terms of employment and personal income?

Hatta's response has been typical. Instead of tackling the problem head on, he found a convenient scapegoat: unfavorable external factors.

While export and import activities certainly impact growth, they are not the sole and probably not the main cause of the slow growth.

The Philippines showed Indonesia up by securing an investment grade from Standard & Poor's (S&P) last week, while Indonesia's rating changed from stable to positive. S&P says it cannot see any significant improvements for Indonesia in the next 12 months.

Fundamentals apply here. The problem and solution, as if Hatta needs reminding, lie right at his doorstep. They have very much to do with government policies that undermine confidence and in turn have affected economic fundamentals.

The economy grew slower because of weaker consumer spending and investment. Indonesia continues to suffer a trade deficit all year long, thanks in large part to the weak international prices of its main export commodities.

Constant changes in investment, mining and trade regulations plus the government's constant appeasement of labor discourage investors, who may soon turn to other more attractive places to park their money. The Philippines looks more attractive.

The government continues to waver on cutting back the soaring fuel subsidies. The decision to defer any action until after the House of Representatives returns to work later in the month only prolongs the uncertainty and fails to boost confidence.

Whatever the government does about the politically explosive fuel price, we also know that it is unlikely to be sufficient to curtail the subsidy bill, which is threatening to eat up as much as one-third of total government spending in 2013. And by however much the government increases the fuel price, it will inevitably lead to higher inflation.

The government doesn't have that many economic options ahead of the 2014 election year. Things will only get worse before they get better.