Regional Macro Economic Development
During the third quarter of 2018, Central Java’s economic recorded a decceleration as much as 5.25% (yoy) which was lower than the previous quarter (5.48% (yoy)). This condition was still slightly higher than the nation’s economic growth which stood at 5.17% (yoy). By contrast, it was still lower than the Java region’s overall growth reaching 5.74% (yoy)
Expense wise, the deceleration was mainly caused by the drop in consumption such as households and government consumption. This took place due to the households’ expense normalisation after reaching its peak during Ramadhan and Idul Fitri in the second quarter of 2018.
Meanwhile, from business sector, Central Java’s economic deceleration was a result of waning manufacturing industry and agriculture. The deceleration in manufacturing industry was thought to be due to fact that there was a drop in oil and gas refinery following the gasoline price normalized demand.
Central Java’s regional income was higher than the second quarter at 76.93%. This condition was encouraged 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 53.17%. On the other side, regional expense also increased reaching 64.86% 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 Rp. 3.33 trillion.
Central Java’s budget allocation in 2018 supported the province’s effort to overcome poverty, build better infrastructure and improving defense and security during the Regional Leader Election. During the quarter, the national expense also increased to reach 60.8%. most of the realization was targeted primarily for providing financial support to villages based on the first stage of the distribution scheme which should have been completed before the end of July 2018
Regional Inflation Development
Central Java’s annual inflation in the third quarter of 2018 was lower than the previous quarter. Based on the inflation disaggregation, the drop was caused by education, recreation and sports, transportation, communication, and service. Demand normalization following religious holidays and the moderately increasing price on education have caused the annual inflation drop during the third quarter of 2018.
Stability of Regional Finance, Financial Access Development, and MSME
Despite Central Java’s decelerating economic growth, its credit growth noted an increase especially in household sector to finance multi-purpose needs, mortgage and automotive with controlled non-performing loan far below the borderline. In corporation sector, demand normalization following religious and national holidays and Rupiah’s drop have become the key factors which corked sales and profit performance inspite of the well controlled corporate liquidity.
SME’s development, financial access and credit distribution program in Central Java consistently displayed accelerating growth. During the reported quarter, SME’s credit reached 40.41% overall with relatively controlled credit quality.
Payment System and Cash Management
The cash and non-cash payment system indicator development in Central Java during the third quarter of 2018 confirmed improving economic performance both quarterly and annualy
Transaction via Bank of Indonesia National Clearing System improved as much as 10.92% (qtq) form the previous period. This condition supports the annual growth which experience a 3.21% (yoy) contraction.
Toll road electronic payment implementation and non-cash social aid distribution have worked smoothly as toll road electronic payment remained steady at 98%. By the end of the third quarter of 2018, non-cash social aid distribution will be expanded to cover 16 regencies/cities in Central Java.
Employment and Welfare
Central Java’s overall welfare condition during the third quarter of 2018 was relatively better which was reflected from the lower poverty percentage and Farmers’ Exchange Value in March 2018. The drop was encouraged by the decreasing number poor people in villages.
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 first quarter of 2019 is projected to improve compared to the previous quarter reaching around 5.2% - 5.6% (yoy). From the expense side, the acceleration is predicted to be the result of increasing household consumption, government consumption and investment. Meanwhile, export is redicted to be stable in the beginning of the year contradicting the increasing international import. On the other hand, from business sector, Central Java’s two main business sectors (manufacturing industry and agriculture, forestry and fishery) are projected to accelerate while wholesale and retail trade; automotive repair 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% - 5.6% in 2018. Domestic economic is expected to be better to boost 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, steady purchasing power, government support through social aid distribution which can affect the improvement in consumption.