IO, Jakarta – Statistics Indonesia (Badan Pusat Statistik – “BPS”) announced the country’s economic growth in Quarter III of 2019 at 5.02% (YoY). Many from within and outside the country harbor doubts about the accuracy of such BPS’ data. How come Indonesia’s economic growth has remained so “stable”, hovering around the 5% range, for such a long time? The 2019 economic growth rate has reportedly been relatively even at 5.07% in Quarter I, 5.05% in Quarter II, and 5.02% in Quarter III, respectively.
Soon after the BPS announcement, Bloomberg.com published an article titled “Economists Are Suspicious of Indonesia’s Steady GDP Figures” Gareth Leather, economist from London-based Capital Economics Ltd., openly expressed doubt about the BPS statement: “We don’t have much faith in Indonesia’s official GDP figures, which have been suspiciously stable over the past few years.” This is because, according to their analysis of our monthly economic data, Indonesia’s economic growth has slowed drastically within the past year.
BPS naturally immediately denied any irregularity in its figures. BPS’ Chairman Suhariyanto stated that their calculations of the GDP and economic growth were performed according to strict guidelines, under monitoring of international institutions like the IMF. Minister of Finance Sri Mulyani also went to BPS’ defense, by stating that there has been no manipulation whatsoever of economic data. BPS is an independent agency that the Government is not allowed to intervene into.
In fact, it makes sense to doubt the validity of Indonesia’s economic growth data as announced by BPS, as recent monthly economic data shows a significant slowdown of the economy in Quarter III of 2019. The primary investment growth source (Gross Domestic Fixed Capital Formation) dropped drastically, from 2.24% (Quarter III of 2018) to a mere 1.38% (Quarter III of 2019). Government expenditure growth dropped 0.48% (Quarter III of 2018) to a mere 0.08% (Quarter III of 2019). This crash of Government expenditure results from poor State tax income, with a tax ratio income at the end of September 2019 standing below 9% of GDP.
Exports and imports have also declined. Exports (nominal value) for Quarter III of 2019 decreased 6.92% from a similar period in 2018. Imports (nominal value) dropped 11.8%. However, according to BPS’ economic growth calculations, exports (real value) rose 0.01%, while imports (real value) dropped 1.82%. Therefore, the export-to-import difference contributed 1.83% (= 0.01% minus -1.82%) to total economic growth in Quarter III of 2019, at 5.02%. In other words, without exports and imports, domestic economic growth is only 3.19% for the quarter (5.02% minus 1.83%). This is one of the lowest rates within the past 5 – or even 10 – years.
These odd monthly data cause many to doubt BPS reports, which does not correlate with the monthly data that BPS itself publishes. The question is, “Is (so-called) independent BPS ‘incapable of errors’? Doesn’t human error occur anywhere?”
By comparison, we quote Arvind Subramanian, an Indian economist, also former economic consultant to the Government of India. He studied India’s economic growth for fiscal years 2011/12 to 2016/17. His research, titled “India’s GDP Mis-estimation: Likelihood, Magnitudes, Mechanisms, and Implications”, was published in June 2019 as a working paper for the Center for International Development at Harvard University.
Arvind surprisingly concluded that India’s reported economic growth rate for the above period was too high, by 2.5%. India’s official economic growth data for the period shows a growth rate of 7% per annum. However, he stated that the real growth rate is probably about 4.5% per annum, with a reliability level of 95% and a 1% margin of error. In other words, India’s economic growth is actually only 3.5% to 5.5%, much lower than the 7% officially reported by the Government of India.
Perhaps India’s Statistics Bureau accidentally made the mistake – maybe the over-estimation of economic growth is not deliberate. Maybe it’s just a matter of human error. But what about Indonesia? Are we also over-estimating the economic growth of our country?