The Jakarta Post
The government, in agreement with the House Commission XI overseeing finance, has cut its gross domestic product (GDP) growth projection for 2019 to between 5.2 and 5.6 percent, from the initial projection of 5.4 to 5.8 percent.
According to Finance Ministry fiscal policy head Suahasil Nazara, the move was prompted by persisting external pressures on the country’s economy, particularly the United States Federal Reserve’s plan to hike its interest rate, which is estimated to continue in 2019.
Suahasil explained that the government’s macroeconomic projection and draft fiscal policy (KEM-PPKF), part of the 2019 state budget bill, were made in February and submitted to the House in May.
“We are aware that volatility in the global [market] is still high. The federal funds rate will go up [in 2019], which will likely affect the Indonesian economy,” Suahasil said in Jakarta on Monday.
“The growth adjustment to between 5.2 and 5.6 percent would make our growth a more realistic target for next year.”
The Federal Open Market Committee (FOMC) meeting on June 13 produced a more hawkish projection for the Fed’s interest rate hike: three hikes in 2019.
Last week, in a bid to defend the rupiah against a stronger US dollar and maintain the competitiveness of the Indonesian financial market amid global liquidity adjustments, Bank Indonesia (BI) decided to raise its key rate by 50 basis points (bps) in a board of governors meeting, bringing the rate to 5.25 percent. (bbn)