Indonesia’s dismal growth highlights need to fast-track productive spending

JAKARTA - Indonesia’s real GDP growth lingered near six-year low levels in Q2 2015 at 4.7% year-on-year, a pace similar to the previous quarter although slightly above market expectations. Growth was broad-based, but undermined by a low rate of budgetted expenditure disbursement, weak private demand, sluggish investments and a protracted contraction in exports.

BBVA Bank researchers say the latest growth out-turn underscores the need for the Jokowi Government to fast-track productive spending. “Doing so should help improve Indonesia’s growth outlook in H2 2015, albeit only marginally given slower global growth, the commodity price slump and weak domestic demand,” the research note says.

“We expect full- year 2015 GDP growth for Indonesia to average a sub-par 5.0% y/y, which is lower than the Government’s recently downgraded annual growth target of 5.2%. www.bbvaresearch.com (ATI).