The government strives to bring Indonesia's economy to grow to 5.6 percent in 2020, from the 5.3 percent targeted this year - Photo by coordinating economic ministry

JAKARTA (TheInsiderStories) – The government strives to bring Indonesia’s economy to grow to 5.6 percent in 2020, from the 5.3 percent targeted this year. The figure mainly supported by investment which is expected to increase by 7.0-7.4 percent and exports rose at 5.5-7.0 percent.

On the supply side, economic growth is expected to be supported by the industrial sector which will increase between 5.0-5.5 percent. While the unemployment rate is expected to fall to 4.8-5.0 percent, accompanied by a reduction in the poverty rate in the range of 8.5-9.0 percent.

To achieve that target, Coordinating Minister for the Economy Airlangga Hartarto said the government had mapped out strategies and priority steps to be taken to face economic challenges in 2020, both internally and externally.

First, the government will increase economic growth through structural transformation to strengthen domestic demand and international trade performance.

Second, maintaining macroeconomic stability by positioning domestic prices and the exchange rate at a stable and competitive level. Third, increase inclusiveness and a sustainable economy.

“Increasing competitiveness is also one thing that is the focus of attention. Sustainable economic growth is also needed to get out of the poverty line and encourage human development,” Hartarto said in a speech at the 2019 US-Indonesia Investment Summit in Jakarta, Thursday (11/21).

Regarding investment, the government will optimize the online single submission system, increase the effectiveness of the investment acceleration task force, relax the negative investment list, and approve investment priority sectors, Hartarto noted.

In addition, the implementation of the tax holiday and super deduction tax and the development of the national strategic project, special economic zones, and industrial estates are also the mainstay policies. The government is also preparing the omnibus law, aims to further simplify the licensing process, the minister said.

On the macro side, the Indonesian economy is actually still growing in quality amid global economic uncertainty. This economic growth was also accompanied by a decrease in the unemployment rate, poverty rate, and the Gini ratio, according to Hartarto.

The minister revealed that economic stability has a positive impact on investment attractiveness. Based on data from Bank Indonesia, the capital and financial account recorded a surplus of US$7.6 billion in the third quarter (3Q) of 2019, supported by inflows of direct investment and portfolio investment.

As a result, Indonesia’s balance of payments recorded a controlled deficit of $46 million in 3Q, well below the deficit in the 2Q of 2019 which reached $2 billion. The balance of payments is also supported by the current account deficit which is managed at 2.7 percent of the gross domestic product.

Fitch Solutions, JP Morgan Sees Growth Below Target in 2019

For 2019, the government is optimistic that economic growth will remain within the 5.3 percent target, according to Hartarto. But a number of international agencies predict that it will grow below the target.

Fitch Solutions, the international research firm, predicts Indonesia’s economic growth will be at 5.1 percent level from initial estimating could be at 5.3 percent. This was caused by the tendency of economic growth in 3Q to be stagnant. In fact, the household consumption trend also weakened from 5.2 percent in 2Q to 5.0 percent in 3Q of 2019.

Then, JPMorgan Chase & Co predicts Indonesia’s economic growth in 2019 will be at 4.9 percent, due to the slowing demand for capital goods. Reporting from its research in the November edition of 2019′ Indonesia’s economic projections, the country’s capital goods demand data illustrates the same trend, one of which is with increased imports of capital goods.

While the International Monetary Fund, World Bank, Organization for Economic Cooperation and Development (OECD) project the Indonesian economy to grow by only 5 percent, and the Asian Development Bank (ADB) by 5.1 percent this year.

Written by Lexy Nantu, Email: lexy@theinsiderstories.com