The first-quarter national economy will still be much affected by loose contribution of the governments spending in the fourth quarter of 2016 due to budget cut, BI Governor Agus Martowardojo said here on Friday.
"We see the first-quarter growth stays within the lower limit particularly because of consolidated fiscal spending in the fourth quarter of 2016," he said.
Government spending is an important component which influences the growth of the countrys gross domestic product, he said.
The government slashed budget spending last year to keep a budget deficit under control. However, only budget spending on less productive activities were slashed.
BI had originally predicted the economy would grow 5.05 percent year-on-year in the first quarter of 2017. Since until late February 2017 the realized fiscal spending had not pushed economic activities as a whole, the central bank had revised downward its economic growth forecast from the targeted 5.05 percent in the first half of this year.
However, the central bank still maintains its economic growth forecast for all of this year at the targeted range of 5-5.4 percent.
The government has set the economic growth target of 2017 at 5.1 percent.(*)
Editor: Heru Purwanto
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