EXECUTIVE SUMMARY Regional Macro Economic Development Central Java’s economic development noted an acceleration of 5.28% (yoy) during the fourth quarter of 2018 which was slightly higher than the previous quarter at 5.21% (yoy). Also, this condition has succesfully surpass the national economic development which stood at 5.18% (yoy). Unfortunately, it was still lower than Java’s overall economic growth which was 5.82% (yoy). Expense wise, the acceleration was mainly caused by the increase in private consumption namely households and non-profit household serving institution, and government consumption. Meanwhile, investment and international export remained improving despite the deceleration suffered during the previous quarter. On the other hand, the province’s import growth relatively significant although considered to be milder than the previous two quarters. Meanwhile, from business sector, the growth in manufacturing industry and wholesale and retail trade have boosted Central Java’s overall economic growth. More over, the significant surge in transportation and warehousing also added the extra ensemble to the orchestra. However, the deceleration in agriculture compared to the previous quarter hampered the overall growth. Government Finance Central Java’s adjusted regional income during the fourth quarter of 2018 was higher than the previous quarter by reaching 101.30%. This condition was encouraged mainly by the regional income consisting of regional tax, managing separated regional wealth and other regional income. The increasing contribution of regional income also improved the region’s autonomous fiscal level to reach 55.76%. On the other side, regional expense also increased reaching 97.23% accumulatively. This amount of expense was used to support social aid and family expectation program. Overall, Central Java’s regional income-expense report recorded a surplus of Rp. 176 billion. Central Java’s budget allocation in 2018 in various main function was in line with the province’s main priority such as public service, poverty alleviation, access to education, and infrastructure development. Regional Inflation Development Central Java’s annual inflation in the fourth quarter of 2018 was higher than the previous quarter although it was still lower than the previous year. It is expected that the province’s annual inflation pressure in the first quarter of 2019 will reduce as food production supply and horticulture increase while public consumption was normalized by the end of the reported quarter. Moreover, the inflation level is predicted to remain under the national inflation target at 3,5±1%. Stability of Regional Finance, Financial Access Development, and MSME Along with Central Java’s improving economic growth, its credit distribution and third party fund also noted an increase even though considered slower than the prior quarter. Also, Credit distribution in household sector reported a growth. Mainly, most credits were applied for multi-purpose financing, mortgage and automotive with NPL kept far below the limit. The increasing demand before Christmas and New Year and rupiah’s stronger exchange rate have become the main factors in boosting sales performance, profitability and corporate repayment capacity during the reported quarter Payment System and Cash Management The cash and non-cash payment system indicator development in Central Java during the fourth quarter of 2018 confirmed improving economic performance both quarterly and annualy based on the safe, swift, and efficient cash and non-cash payment system which was able to support Central Java’s financial transaction. Transaction via Bank of Indonesia National Clearing System indicated a contraction as much as 0.64% (qtq) from the previous period. This condition reflected the annual transaction value which also experienced a 4.90% (yoy) contraction. Employment and Welfare Central Java’s overall welfare condition during the third quarter of 2018 was relatively better which was reflected from the decreasing poverty level and increasing Farmers’ Exchange Value in March 2018. The drop was encouraged by the decreasing number of poor people in village areas. Human Development Index improved relatively as the number of productive citizens increased during August 2018 compared to the same period in the previous year indicating the potential availability of work force. Meanwhile, there was a sheer drop in the number of unemployment in August 2018 which contradicted the increase in the number of potential work force. Prospect of Regional Economy Central Java’s economic growth in the second quarter of 2019 is projected to improve compared to the previous quarter reaching around 5.3% - 5.7% (yoy). The acceleration is predicted to be the result of seasonal patterns occuring in Ramadhan and Eid Al-Fitr also the general and presidential election taking place in April 2019. From the expense side, the acceleration is predicted to be the result of improving household consumption, non-profit household serving institution. Nevertheless, export and investment are predicted to decelerate although remain positive. On the other hand, from business sector, Central Java’s two main business sectors (wholesale and retail trade; automotive repair and agriculture, forestry and fishery) are projected to accelerate while manufacturing industry will grow rather slowly. Overall, Central Java’s economic growth in 2019 is expected to be better than 2018. Standing at 5,3% - 5,7% (yoy), it is projected to be better than the previous 5,2% - 5.32% (yoy) in 2018. Domestic economic is expected to improve for boosting household’s purchasing power and consumption. Increasing demand will be boosted by the optimism in the increase of domestic demand which will be supported by the General Election expense prospect, additional income, and well controlled inflation.