Indonesia: Full Confidence on Independence Day
Indonesian Independence Day on August 17 was celebrated with high self-confidence from the government. The celebration was marked by a variety of traditional dress from around the country, and it displayed the cultural variety this country has always enjoyed. President Joko Widodo (Jokowi) wore the traditional dress from South Kalimantan, even though he is originally from Central Java. At the same time the First lady wore the traditional dress from West Sumatra. Vice President Jusuf Kalla, on the other hand wore Bugis, South Sulawesi, traditional clothing. It made the independence day ceremony very festive.
In the past few months, Indonesia has been disturbed by the rise of radicalism and intolerance, especially related to the gubernatorial election in Metropolitan Jakarta, which ended in the loss by Basuki Tjahaja Purnama or "Ahok" of the election as well as his imprisonment due to a blasphemy allegation. Since then, the Indonesian Government has tried very hard to rectify the problem by empowering moderate Muslims as well as enacting a law to prevent the existence of radical organizations. The celebration of Independence Day with traditional dress from all over the country was designed to enhance people’s awareness of that kind of diversity. The celebration of the Independence Day was widespread throughout the country, each region with its own tradition.
On August 16, 2017, the day before Independence Day, President Jokowi presented the draft budget of 2018 to parliament, which showed the confidence of the government on the prospects for the economy and the programs that will be delivered in the coming year. Despite the limitation on government revenues, the draft budget tried to strike a balance between developing the infrastructure and social spending for attacking poverty and narrowing the income gap. While skepticism lingers, I have full confidence that this draft budget is credible and gives room to the government in case of a shortfall in government revenue. The draft budget is planned to have a deficit of 2.19% of GDP, lower than the deficit last year as well as the projected deficit this year.
Early in the month the report of the economy was presented by the Central Board of Statistics. The Indonesian economy continued to report slightly over 5% growth in Q2 2017 and a slightly higher current account deficit over the previous quarter. The Central Board of Statistics announced economic growth of 5.01% Y/Y, especially supported by Indonesian exports as well as investment activity, while consumption once again grew slower during the period. At the same time, the current account deficit hit 1.9% of GDP on Q2 2017, slightly higher than the previous quarter but significantly lower than the same period of the previous year.
While the balance of payments report for Q2 2017 was relatively sanguine, the Central Board of Statistics reported a deficit in the trade balance for July 2017. Exports for that month increased considerably but imports grew more rapidly, which finally reversed the balance from a huge surplus in June to a considerable amount of deficit in July . My own take on this number, once again, is the shift in the holidays, which made for a number of anomalies in the statistics of the economy. Exports in July reached $13,617.0 million, considerably higher than the exports figure in June. In fact, compared with the same period of the previous year, total exports increased by 41.12% due to the low base of comparison. However, imports in July 2017 rose faster, by 39% from the previous month, to reach $13,888.2 million. Year over year, imports grew by 54.02%. This resulted in a trade deficit of $ 271.2 million.
The Central Board of Statistics also released the inflation report, which showed relatively mild inflation for the month of July 2017 at 0.22%. With that performance, Y/Y inflation stood at 3.88%, down from the previous month. Such benign inflation led the Central Bank to slash the bench mark interest rate by 25 basis points to 4.5% at its Monetary Policy Meeting on August 22, 2017.
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