JAKARTA, NNC - Bank Indonesia (BI) predicts Indonesia's economy in the first quarter of 2018 to grow better than the same quarter of the previous year. The growth is driven by increased investment and government consumption, stable private consumption, and positive export performance.
Executive Director of the Communication Department of BI Agusman said that the rise in investment mainly occurs in the construction sector in line with the completion of infrastructure projects and in the primary sector with increasing external demand.
"Private consumption is growing steadily sustained by maintained public purchasing power and an increase in election-related spending. Government consumption is increasing following the acceleration of social aids and village funds," he said in an official statement on the results of BI's Board of Governors Meeting on Thursday (3/22/2018).
Meanwhile, from the external side, exports are expected to grow positively influenced by the improvement in world economic growth. Meanwhile, imports are also expected to increase especially related to investment and export needs with high import content.
"With these developments, for entire 2018, the Indonesian economy is forecasted to grow in the range of 5.1 percent to 5.5 percent (YOY)," he said.
BI also predicts that global economic growth in 2018 will continue to rise despite several risks that need to be observed. The rise in global economic growth stems from improving economies of developed countries and developing countries.
In developed countries, US economic growth in 2018 is predicted to be supported by stronger investment and consumption as the impact of fiscal stimulus. The rise of Fed Fund Rate (FFR) by 25 basis points on March 21, 2018 is in accordance with Bank Indonesia's forecast.
In future, Bank Indonesia also estimates the process of normalizing US monetary policy will continue with the FFR to be raised again. Meanwhile, the European economy is expected to grow better, supported by improved exports and consumption as well as accommodative monetary policy.
In developing countries, China's economy is predicted to maintain high growth driven by rising consumption amid a slowdown in investment, especially real estate, as the economy rebounds, following the rebalancing process of economy. The prospect of an improving global economic recovery will boost the volume of world trade that impacts on strong global commodity prices, including oil, by 2018.
"However, there are a number of global economic risks that need to be observed. US higher economic growth may lead to a faster-than-expected increase in FFR," he said.
Meanwhile, the tendency of the implementation of inward-oriented trade policy in some countries has the potential to cause retaliation from other countries that can reduce the global trade volume and economic growth.