Minister of Finance Sri Mulyani Indrawati in the 23rd Plenary Meeting of Parliament, in Jakarta (26/04) - Photo by Finance Ministry

JAKARTA (TheInsiderStories) – Minister of Finance Sri Mulyani Indrawati said on Friday (18/5) the government had set the target of economic growth in 2019 in the range of 5.4 per cent to 5.8 per cent, higher than this year target at 5.4 per cent.

“The growth target is directed to promote equitable growth across Indonesia, by accelerating the development of eastern Indonesia, border areas, outermost and underdeveloped regions,” said Indrawati during the House of Representatives plenary meeting.

Indonesia’s government expects to set the rupiah assumption at 13,700-14,000 a dollar on average next year, taking into account higher interest rates in the United States, according to a preliminary budget document submitted by the finance ministry to parliament on Friday.

The rupiah has slid to its weakest in more than two years in recent weeks as global investors pull out funds from emerging markets. It hit 14,135 a dollar, the weakest since October 2015, on Friday, much weaker than the government’s assumption for a 2018 average of 13,400.

The ministry said the forecast reflected four U.S. interest rate hikes in 2018 and a hawkish stance in 2019 by the Federal Reserve, as well as less portfolio flows into emerging markets in the next two years.

The government also expects Indonesian crude oil prices to average at $60-$70 per barrel next year.

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.

In addition, the momentum on investment and exports also continues to be maintained by eliminating the various regulations that hamper the central and local governments and reforms in the field of taxation and employment.

Indonesia has experienced strong economic growth and steady poverty reduction over the past decade, but the end of the commodity boom, accompanied by slowing poverty reduction and rising inequality, has put pressure on the country’s overall economic development.

Indonesia’s average annual growth rate was 5.6 per cent in the period 2001-12, equivalent to a GDP per capita of about US$3,500. The national poverty rate was halved to 11.2 per cent in the period from 1999 to 2015, largely through sustained growth and job creation.

However, the decline in commodity prices and demand slowed growth to 4.8 per cent in 2015 and 5.1 percent in 2016. The pace of poverty reduction also began to stagnate around this time, with a near zero decline in 2015, accompanied by rising inequality, as measured by the Gini coefficient.

By April 2018, Indonesia booked double-digit tax revenue growth boosted by growth in import taxes as well as corporation tax.

Tax revenue, which includes income tax from oil and gas, value added tax (PPn), property tax (PBB) and luxury goods tax (PPnBM), was Rp 383.3 trillion (US$ 27.23 billion) from January to April.

The tax revenue grew by 14.08 percent year-on-year (yoy) compared to the same period last year if the revenue from the tax amnesty is excluded.

The government collected Rp 12 trillion in penalties as part of the tax amnesty, which ended in March 2017.

Written by Elisa Valenta, email: