Consumer Spending Should be increased to Boost Economy
The government is trying to increase consumer spending to boost economic growth this year. One of the ways it is doing this is through the annual holiday allowance and 13th salary payment.
JAKARTA, KOMPAS — The government plans to increase social spending to help push up consumption by low-income households. The middle income households are also expected to increase their spending during the Ramadan and the Idul Fitri holidays.
Another step taken by the government is to provide the annual holiday allowance (THR) and the 13th salary to civil servants, members of the Indonesian military, the police and pensioners. The THR and 13th salary payments are expected to increase consumer spending in order to increase consumption growth.
On the other hand, the security situation in the country after the announcement of the results of the 2019 elections on May 22 would determine the economic performance this year because political certainty can increase people\'s purchasing power and accelerate the realization of the investment plan.
In the 2019 State Budget, the government targets 5.3 percent economic growth. According to Statistics Indonesia (BPS), the economy growth was 5.07 percent in the first quarter of this year. Household consumption, which increased 5.01 percent, contributed 56.82 percent to gross domestic product (GDP), or 2.75 percent to the 5.07 growth rate, in the first quarter of this year.
Finance Minister Sri Mulyani Indrawati said she hoped investment would also become one of the main drivers of economic growth in the second quarter of 2019. "Hopefully, investment will increase after the 2019 election because there is political and policy certainty from the government," she said in Jakarta on Wednesday.
Sri Mulyani said she was optimistic that the 5.3 percent economic growth target would be achieved. To do so, the government is to continue to implement policies that are able to maintain business and consumer confidence in the country.
As part of the effort to raise people’s spending, the government has allocated about Rp 40 trillion from the state budget for the payment of the annual THR holiday allowance and 13th salary to civil servants, members of the military and the police, as well as pensioners.
The payment for THR and 13th salary this year is to be higher than the Rp 35.76 trillion in the previous year. The amount consists of Rp 20 trillion for THR and Rp 20 trillion for the 13th salary.
According to Sri Mulyani, the government regulation related to the THR and 13th salary payment has been signed by the President. The finance minister\'s regulation for the disbursement of the allowance was issued on Tuesday. "All ministries, institutions and local governments can start submitting their proposals for the allowance payment," she said.
The THR allowance is to be disbursed on May 24, while 13th salary is to be paid ahead of the new academic year so that it can be used to pay school fees.
According to a lecturer at the School of Economy and Business at the University of Indonesia, Fithra Faisal, the THR and 13th salary payment would make a positive impact on economic growth. Moreover, consumption is the biggest contributor to economic growth, he added.
Certainty
The secretary-general of the Association of the Indonesian Olefin, Aromatic and Plastics Producers (Inaplas), Fajar Budiono, said on Wednesday that people\'s purchasing power would be supported by the growing activities in the industrial and trade sectors.
The certainty and security after the announcement of the election results on May 22 would accelerate the realization of the investment plan in the industrial sector this year. The increase in investment would also help propel the economic growth.
According to the Investment Coordinating Board (BKPM), investment realization from January to March 2019 reached a total of Rp 195.1 trillion, which consisted of Rp 107.9 trillion in foreign investment and Rp 87.2 trillion in domestic investment. This year\'s investment realization is expected to reach Rp 792 trillion.
The chairman of the association of industrial estate developers, Sanny Iskandar, said the investment climate should be further improved in order to attract more investment.
Meanwhile, the executive director of the Institute for Development of Economics and Finance (Indef), Tauhid Ahmad, said that economic growth of 5.07 percent in the first quarter of 2019 was not a good start for the year.
The economic growth must be further increased through policies that can push up the purchasing power of middle-income people, improve industrial competitiveness and change export strategies. (JUD/CAS/SHR)