"The growth was revised down because public and private investment is slowing down and exports are weakening," said ADB Chief Representative in Indonesia Steven Tabor.
Jakarta (ANTARA News) - The Asian Development Bank (ADB) has predicted Indonesias 2016 economic growth will reach 5 percent, down from its previous projection of 5.2 percent in March.

The ADB revised down its previous projection, considering the weak performance of investments and exports seen so far.

"The growth was revised down because public and private investment is slowing down and exports are weakening," said ADB Chief Representative in Indonesia Steven Tabor following the release of the latest ADB report on Tuesday.

Tabor explained that household consumption, a major supporter of national economic growth, will be challenged by the weakening of the global economy, which could reduce peoples demand.

However, according to him, a higher minimum wage, the increase in the non-taxable income limit, and the slowdown in the rate of inflation may encourage the growth of household consumption.

"The increase in the budget allocation, which is higher for village funds, and better prospects in the agricultural sector will also increase income in rural areas," stated Tabor.

In addition, private investment will also benefit from the application of economic packages I--XIII because of the improvement of the investment climate and the simplification of the business regulation process.

Tabor also predicted an increase in government spending on infrastructure development in the second half of 2016, which is consistent with the pattern of annual increases in budget spending toward the end of the year.

"Overall, however, investment and government consumption will be lower than previously forecast due to a lower realization of revenue from taxes," said Tabor.

Tabor reminded policymakers in Indonesia of the need to consider various measures to address the risks to the growth outlook in the event of budget cuts and delays in executing infrastructure projects.

In this edition of the annual economic update for 2016, ADB also estimates that Indonesias economic growth in 2017 will reach 5.1 percent, down from a previous projection of 5.5 percent, because of a slowdown in investment performance.

Meanwhile, Deputy Chief Representative of ADB in Indonesia Sona Shrestha added there are still opportunities for the Indonesian economy to grow more healthily this year, despite the downturn resulting from the global economic slowdown.

"With the increasing realization of policy reforms in Indonesia and the improving momentum of economic growth in the major industrial countries, it is likely that we will see further economic improvement," remarked Shrestha.

This latest report also noted a reduction in employment opportunities, which could weaken public trust due to income stagnation, rising unemployment, and the problem of overqualified.

"The agricultural sector can absorb more labor because of delays in the harvest season, but the labor market for highly educated workers is experiencing wage stagnation, taking in increasing numbers of graduates even though the job does not require high qualifications," said Shrestha.(*)

Editor: Heru Purwanto
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