Bank Indonesia (BI) will conduct a study in the effect of government spending cut back in the 2016 Revised State Budget (APBN-P 2016) against economic growth.
BI Governor Agus Martowardojo said that budget cuts will not result in negative effects if it was implemented on sectors considered to be less fundamental to the economy. "We are worried that the cut backs will be implemented on the development or infrastructure sector," Agus said on Monday, August 8, 2016.
Agus added that in general, Indonesia's economic condition is improving and continue to record positive trends. Agus said that the 5.18 percent growth in Q2 of 2016 is proof enough that the economy is going in the right direction.
The 5.18 percent growth was more that what the Central Bank previously expected. Bank Indonesia predicted that the economy will only grow by 4.9 percent in Q2 of 2016. Agus added that based on studies conducted by Bank Indonesia, almost all sectors of the economy is improving.
Some of the improving sectors include household consumption, government spending, and investments. In addition, delayed harvest season, which occurred in Q2 instead of Q1 was said to be the major contributor of the high growth rate. "[The delayed harvest] is the main cause of better growth in Q2," Agus stated.