Jakarta. The central bank has revised down its full-year economic growth target for Indonesia to the range of  5 to 5.2 percent, from the previous range of 5 to 5.4 percent.

Bank Indonesia Governor Agus Martowardojo cautioned that the new target could only be met “if the stimulus can be realized,” referring to delayed spending on much-needed infrastructure and development projects.

Red tape and infighting among bureaucrats has dragged out planning for most projects in the first half of the year, but President Joko Widodo said last week that bidding for all the projects had been concluded and the government was preparing to disburse funding in the second half of the year.

Bank Indonesia’s growth target cut comes as the World Bank also revises down its 2015 projection for Indonesia to 4.7 percent from 5 percent before. The Asian Development Bank has also cut its projection for Indonesia from 5.5 percent to 5 percent.

Indonesia’s gross domestic product expanded by 4.7 percent in the first quarter of 2015, its slowest pace in five years. The Central Statistics Agency (BPS) is scheduled to announce second-quarter results on Aug. 5, but economists are predicting the figure will remain less than 5 percent.

“June trade data was a strong indication of this, given the sustained weakness in export and import data for the month,” Gundy Cahyadi, an economist at Singapore’s DBS Bank, wrote in a note to clients.

“Imports of capital goods shrank some 20 percent in [the] second quarter, a strong indication that investment growth might have remained circa 4 percent in the period, rather than circa 5.5 percent that we had expected earlier. Imports of raw materials fell 21 percent in the period, the worst since 2009,” Gundy wrote.

He said growth of 4.7 percent in the second quarter would translate into full-year growth of just 4.9 percent, even with increased government spending in the second half.

“It only means that full-year GDP growth may even be lower, if we don’t see any improvement in the pace of fiscal spending going forward,” Gundy said.

The government has spent 41 percent of its Rp 1,984 trillion ($148 billion) budget so far this year, according to Finance Minister Bambang Brodjonegoro. He said the government could disburse 96 percent of the budget by the end of the year.

Investor Daily

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