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Government spending fails to jack up growth as tax revenue slows
Public spending, which accounted for around 8 percent of gross domestic product (GDP), only grew 0.98 percent in the third quarter of this year, Statistics Indonesia (BPS) data show.
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A building of the Directorate General of Taxation in Jakarta (kontan.co.id/File)
G
overnment spending has failed to jack up Indonesia’s economic growth in the third quarter as it struggles with a tight budget due to low tax revenue amid a slowdown in the industrial and mining sectors.
Public spending, which accounted for around 8 percent of gross domestic product (GDP), only grew 0.98 percent in the third quarter of this year, Statistics Indonesia (BPS) data show. The figure is a far cry from 6.96 percent growth recorded over the same period last year.
Government spending is seen to have a big impact on the economy as it will spill over to other GDP components, such as investment and household spending.
Indonesia’s economy only expanded by 5.02 percent year-on-year (yoy) in the third quarter, slowing further from the two-year low of 5.05 percent yoy recorded in the previous three-month period. Household spending stagnated while investment growth plunged but net export came to the rescue as import fell more than export.
“Government spending realization in the third quarter of 2019 amounted to Rp 559.98 trillion [US$40 billion] or 22.75 percent of the 2019 allocation of Rp 2.46 quadrillion,” BPS data reads.
The figure is down from the third quarter of 2018, when the realization reached 25.59 percent of the allocation.
Read also: Experts call for labor, bureaucracy reforms to boost investment growth
