Regional Macro Economic Development
During the second quarter of 2018, Central Java recorded an acceleration of 5,54% (yoy) which was higher than the first quarter at 5,43% (yoy) and the same period during the previous annum at 5,18% (yoy). This achievement was even better than the national economic growth standing at 5,27% (yoy), but it was still lower than the overall Java which was noted at 5,69% (yoy).
From the Expense side, the acceleration was supported by the rise of private consumption especially household consumption and investment. On the other side, the high level of international import contradicted the effort to improve international export.
Meanwhile, from the business sector, the improvement in major and retail trade and agriculture boosted the province’s economic growth. Unfortunately, there was also significant deceleration in manufacturing industry from the previous quarter which halted the growth in the period reported.
Central Java’s regional income was higher than the first quarter at 52,43%. This condition was encouraged by the regional income consisting of regional tax, managing separated regional wealth and other regional income. This came as a result of the regional government’s efforts in boosting the tax revenue by socializing broadly to tax payers and promoting a reward for automotive tax payers. In line with the increasing income, expense also rose to stand at 40,57%
contributed by expense for employees, grant, goods and service, and profit sharing. This condition was in line with : (i) Central Java’s regional leader simultaneous electionat the of june 2018; (ii) distributing school operational support during the recorded quarter; (iii) 13th salary for government officers and retirement from June to July 2018. Overall, there was a surplus of IDR 2,66 trillion in the second quarter of 2018.
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 37,34%. Sixty percent 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 annual inflation in the second quarter of 2018 was noted at 2,72% (yoy) or lower than the previous quarter (3,39% (yoy)). Meanwhile, quarterly, the province’s inflation of 0,69% (qtq) was lower than the previous quarter which stood at 1,24% (qtq). Also, it was lower than both the national inflation and overall java’s inflation which was recorded at 3,12% (yoy) and 2,90% (yoy), respectively.
Based on the inflation disaggregation, the fall was caused by volatile food, housing, water, electrivity, gas and fuel. On the other hand, the other 5 categories noted an inflation acceleration compared to the previous quarter. Despite the fall, food remained as Central Java’s main annual inflation contributor with 0,74% overall. Next, another category contributing to the inflation was volatile food, beverages, cigarettes and tobacco which held the second rank at 0.65%.
Stability of Regional Finance, Financial Access Development, and MSME
As Central Java stabilized its economic performance during the second quarter of 2018, Central Java’s credit growth was noted higher than first quarter, especially at the main economic sector.
The increase of minimum regional wage and the minimum inflation pressure affected the increasing household consumption and influenced corporates’ sales performance. The rise in household consumption could still be supported by the annual bonus distribution which resulted in lower credit growth compared to the prior quarter. Meanwhile, from the corporation perspective, the increasing cost (mainly caused by the increasing minimum wage in 2018 and the currency exchange rate) halted the corporation’s profitability ratio which was relatively lower than the first quarter. Fortunately, corporates’ performance was still in a good condition as liquidity and solvability ratio was still considered safe enough.
Payment System and Cash Management
The cash and non-cash payment system indicator development in Central Java during the second quarter of 2018 confirmed a stable quarterly improvement in regional economic performance. Retail financial transaction processed through SKNBI improved better than the previous quarter despite several contractions.
Rupiah management noted a net outflow of IDR 5,46 trillion as the increase of cashflow from the Central Bank to commercial banks to support the people’s needs during Ied Fitr 2018. At the same time, the currency inflow to the Central Bank also climbed by 16,28% (qtq) to reach IDR 24,38 trillion.
Foreign exchange transaction in official foreign exchange bureau increased during the second quarter of 2018. This condition was in line with the improving number of foreign visitors to Central Java. Also, electric toll payment rose to 98,6% during Ied Fitr 2018 from 95 – 97% during normal days. The transformation in the non-cash social aid distribution program was conducted by coordinating with the Social Department and banks, educating and monitoring the distribution agent, the companion, and the receiver both for the Expected Family Program and the Non-Cash food support.
Employment and Welfare
Central Java’s overall welfare condition was relatively better which was reflected from the lower poverty percentage and Farmers’ Exchange Value. Poverty level in March 2018 was lower than the same quarter in 2017. The drop was encouraged from the decreasing number poor people in villages.
Farmers’ Exchange Value during the second quarter of 2018 displayed an improvement from the first quarter or from the second quarter of 2017. This progress showed similar increasing trend as in 2017 which resulted from productivity recovery in Central Java’s agriculture following El Nino phenomenon in 2016.
Human Development Index improved relatively which indicated improvements both in education and health. Next, the expense gap among Central Javanese people increased slightly from March 2017 to March 2018. Compared to other provinces in Java, Central Java’s Gini ratio was the lowest.