Measurement of Regional Financial Performance and Economic Growth: A Lesson from North Sumatra Province, Indonesia

Abstract

The research aims to provide the input to the Government of City and County in evaluating the financial performance in each region. Using the variables include the ratio of the debt to GDP, income of the original of the region and regional income, debt service ratio, the growth of spending, spending and efficiency ratio expenditure regions to GDP. Additionally, analyzing the ratio which has a strong influence on economic growth in the city of Medan, Binjai and county of Deli Serdang in ranging from 2008 to 2014. The results showed that the ratio of the debt to GDP, the ratio of debt to income of original regions, debt service ratio, debt ratio to income region, growth of expenditure ratio, expenditure ratio efficiency, expenditure regions to GDP simultaneously impact to the centre of economic growth (refer to GDP rates apply) in the Government county of Deli Serdang, Medan and Binjai in North Sumatra. Besides, the results showed the ratio of debt to GDP and debt ratio to income of the original regions partially has affected negatively to GDP (rates apply). Otherwise, debt service ratio, and ratio of regional expenditure to GDP have a positive effect on the GDP (rates apply), debt ratio to income regions, the findings result also shows that partially the growth of spending, and spending efficiency ratio have not effect on the GDP (rates apply) to entire the City Government both in county and city as well as in Deli Serdang region, North Sumatra Province. The research results also showed the Adjusted R Square of the debt ratio to GDP, the debt ratio to the Income of the original of region, debt service ratio, the debt ratio against the income regions, the growth of expenditure, expenditure ratio efficiency, expenditure regions to GDP is 68,80%, whereas 31.20% are caused by another factors such as the ratio of financial dependency of the regions, the growth of debt, the realization of revenue and expenditures and the other financial performance ratios.