JAKARTA (TheInsiderStories) – Goldman Sachs predicted Indonesia economic growth will be slackening to 5 percent in 2019, lower than this year’s projection at 5.2 percent. The slowdown is caused by financial tightening and negative fiscal.
Besides, unfavorable external factor such as United States – China trade war and global economy slowdown will make Indonesia government prioritizing economic stability other than economic growth.
Indonesian Finance Minister Sri Mulyani Indrawati sees the country’s economic growth
5.3 percent in 2019. She said for the first time Indonesian gross domestic products reached Rp2,000 trillion (US$139.86 Billion) from this year is estimating around Rp1,900 trillion.
Some projection, S&P Global Rating also rated Indonesia’s economic growth
in 2019 will not far from the 5 percent. The reasoned, a number of risks has the potential to influence the Indonesian economy in the upcoming presidential elections.
Vincent Conti, the Economist of Asia Pacific S&P Global, said there are several supporting factors that influence economic growth in 2019, which is increasing of government spending, public spending and demographic bonuses.
However, there are several factors that could hinder the economic growth
in 2019, such as the removal of price controls, tight monetary policy and uncertainty over economic conditions after the presidential election.
“The government will also pay attention to the current account deficit and pressure on the currency market next year,” Conti said as quoted from written statements today (11/22).
Furthermore, Sovereign and International Public Finance Ratings S&P Global Rating Andrew Wood explained, Indonesia has a higher debt level
than other Asian countries. As a result, this affects the level of Indonesia’s balance of payments deficit.
“However, Indonesia is still better than other fragile five countries such as Turkey, Qatar, Pakistan, Egypt and Argentina,” he said.
Wood also stressed that Indonesia should not be too lulled by the current political frenzy, but pay more attention to its impact on broader price, subsidy and fiscal policies.
Corporate Ratings S&P Xavier Jean added, there are several sectors that are potentially affected by the 2019′ presidential election. The real estate
sector is the sector that can be exposed to the highest risk. Moreover, the condition of this sector was exacerbated by the growth in supply from low-cost housing projects.
Other sectors that have potential affected are the energy and power sectors amid the electricity and fuel price controlled by the government, and also how the state-owned PT Perusahaan Listrik Negara anticipates the problems in its companies.
The other sector is the infrastructure sector due to tariff adjustments to support the period before the presidential election and the risk of execution in infrastructure projects.
“The risk of Rupiah depreciation also affects the real estate, manufacturing and airlines sectors, but the risk of mismatch due to this currency is still manageable, especially in open companies,” he said.
Bank of Indonesia also sees the 2019’ economic growth projection, in accordance with the 7-Day Reverse Repurchase (7-DRR) rate increase to 6 percent in the latest Board of Governors meeting. Previously, the central bank predicted Indonesia economy may grow by 5.1 percent to 5.5 percent next year.
The Bank said, global economic slowdown is happening and estimated to impact 2019. Three world’s biggest economies have shown their curtails, such as China, Japan, and Germany.
Indonesia’s average annual growth rate was 5.6 per cent in the period 2001 – 2012, equivalent to a GDP per capita of about $3,500. According to Indrawati, one of the efforts to boost economic growth
is by prioritizing value-added economic sectors to make domestic markets more robust and to promote productivity.
Furthermore, the former World Bank’s chair said, the government will design the state budget with a deficit below than 2 percent, but enough to keep stimulating the economy. This year, she predicted the budget deficit 2.12 of the 2018’s GDP.