Customers shop at a retail shopping center in Tebet, South Jakarta, Thursday (27/7). The Indonesian Retail Association’s data shows that the retail spending in June 2017 grew only 5-6 percent, or only about half of the 11.75 percent growth recorded in the same period last year. Saving toward educational costs is one of the causes of the decline in buying goods, as the new school year commenced in July.
Indonesia’s economic growth in this year’s second quarter was lower than expected. Potential for growth can be found in manufacture, agriculture and trade industries.
Central Statistics Agency (BPS) data released on Monday (7/8/2017) showed that the country’s economic growth in the second quarter of 2017 was the same as that in the first quarter, which is 5.01 percent. This figure is lower than the target of 5.2 percent. Growth in the same period last year was higher at 5.18 percent.
The BPS data answered the public debate on consumption. Purchasing power did not dissipate in general, as people were abstaining from shopping while investing in the financial sector.
Previously, some had complained about the decreasing sales at retail stores and wholesale markets because of the growing trend of online shopping. Another argument cited the decreasing consumption of the lower-middle class.
In expenditures, public consumption is still the main source of growth, contributing 55.61 percent of the gross domestic product. However, this growth has slowed to 4.95 percent compared to 5.07 percent in the second quarter of 2016. The condition is a slight improvement from 4.94 percent in the first quarter.
Data also shows that investment grew at 5.35 percent in the second quarter, the highest since 2013.
Our economy grew below expectations, while the International Monetary Fund reported high growth for other economies in the region, such as the Philippines (6.8 percent), Vietnam (6.5 percent) and Myanmar (7.5 percent). These countries are also facing the same challenges as us.
According to the BPS, the biggest contributors to growth among the business sector are industry, trade and agriculture. The increase in these three interconnected sectors serve as huge capital in creating growth and jobs as well as reducing inequalities.
The food and beverage industry grew significantly. However, between 70 percent and 100 percent of raw materials, including sugar, juice ingredients and wheat, were imported. As a result, there is no upstream relationship between the industry and the agriculture sector. Instead, the imports resulted in pressure on prices for farmers and a lack of production incentives. In the downstream, only the packaging industry grew.
The government needs to promote these three interrelated sectors. Agriculture provides raw materials for industries with the support of an efficient trade system.
Unfortunately, recent government policies have been giving out confusing signals, including the allegations of cattle, egg and poultry cartels, arrests of food traders and introducing the highest retail price for food commodities.
For sustainable and high-quality growth, the government should fix the production chain and trade system from upstream to downstream and eliminate rental practices.
The government should also curb political furor and provide certainties for businesses. What is necessary is the government’s political will.
