Regional Macro Economic Development In the second quarter of 2019, Central Java's Gross Regional Domestic Product (GRDP) was recorded at IDR 339.8 trillion or 5.62% (yoy) compared to previous quarter which reached 5.12% (yoy). This achievement is in line with Bank Indonesia's projections which forecasted the growth to be around 5.3% - 5.7%. Furthermore, this growth rate was above the national economic growth which stood at 5.05% (yoy). In terms of expenditure, the province’s economic acceleration mainly came from household consumption and non-profit institutions serving households (LNPRT) as public demand also climbed adapting with seasonal patterns such as Ramadan and Idulfitri. As a component reducing GDP, the decline in foreign imports had a positive effect in driving Central Java’s economic growth. In terms of business sectors, the improvement in economic performance was supported by the improving performance of agriculture, forestry and fisheries sectors, which are affected by the shifts of the harvesting period. Government Finance Overall, Central Java provincial income in 2019 is targeted to reach Rp25.97 trillion. Meanwhile, during the second quarter, driven by components like Regional Balance Fund and Original Local Government Revenue, it hit IDR 12.69 trillion. On the other side, IDR 9.26 trillion expenditure mainly derived from the increase in indirect spending on the personnel and grant components. This was used for distributing PKH phase II, and salary increases and THR bonuses to government employees. Regional Inflation Development During the second quarter of 2019, Centra Java’s annual inflation was higher than in the preceding quarter. The increase was mainly a result of increasing annual inflationary pressures in foodstuffs and processed foods, beverages, cigarettes and tobacco sectors which was caused by the drop in horticultural commodities supply. The recovery in production and investment will add the price pressure of goods and services components in housing, water, electricity, gas and fuel sectors. Central Java's annual inflation increase is estimated to remain below the national inflation target of 3.5 ± 1%. Regional Financial Stability, Financial Access Development, and SMEs In line with the growing economic performance in the quarter, Central Java’s financial system stability was well maintained. Credit distribution in wholesale and retail trade, agriculture, and construction sectors continued to grow and support those previously mentioned business sectors to give their contribution to the province’s economy. In addition, credit distribution to manufacturing industry busines sector recorded a contraction which is relatively stable due to corporate activity driven by external factors (escalation of trade wars between the United States and China). Furthermore, corporate performance indicators such as profitability, liquidity, and monitored financing structures are still well-managed. Payment System and Cash Management Central Java’s payment system indicators development during the quarter showed an improving performance, in line with the economic growth. The transaction value through SKNBI continued the contraction trend but grew from the first quarter of 2019. The quarterly reported growth contracted by 0.66% (qtq) compared to the previous quarter, in line with the 11.34% (yoy) contracting annual growth. Employment and Welfare Central Java’s overall welfare in the second quarter of 2019 was relatively improved, reflected by the drop in poverty levels, increasing labor availability, Human Development Index (HDI) and Farmer Exchange Rates (NTP). Moreover, Farmer Exchange Rate (NTP) showed an increase from the first quarter of 2019 and the same quarter in the previous year. Also, Human Development Index (HDI) rose with improvements in education, health, and living standards. Regional Economic Prospects Overall, Central Java’s economic growth in 2019 is expected to improve compared to 2018, despite being relatively limited. Based on expenditure, the acceleration is estimated to come from household consumption, domestic consumption and government consumption. Furthermore, international exports are expected to decelerate adapting with the forecasted fall in world trade volume due to declining global economic growth and the risk of strained trade relations between countries. Investment growth is also expected to decelerate with the completion of several strategic government projects by the end of 2018. The uncertain global economy and domestic political climate before and after the election are also expected to encourage businesses to wait-and-see before investing. Annual inflation in Central Java as a whole in 2019 is expected to increase from last year. The main factors predicted to drive the increase in annual inflation are mainly from domestic conditions. The decline in agricultural performance as a result of El-Nino driving inflation in foodstuffs, has a continuous impact on processed food, beverages, cigarettes and tobacco sectors.