Indonesian government optimistic economic growth 5.4 to 6.1% in 2018

Photo by Finance Ministry

JAKARTA (TheInsiderStories) – Indonesian government optimistic the economic growth in 2018 to be stronger driven by strong private investment and export performance, said senior official.

The Indonesian government in 2018 is expected to grow in the range of 5.4 to 6.1 percent from this year target aroudn 5.2 percent.

Meanwhile, Bank Indonesia (BI) estimates that Indonesia’s economy to grow between 5.1 to 5.5 percent next year. Those projection is better than the projected Indonesia’s gross dometic product (GPD) in this year to grow 5.1 percent.

Finance Minister Sri Mulyani in her speech at parliament said that the key to boost GDP is in investment growth.

“Investment is the most important challenge for us to increase GDP growth without disturbing fiscal and macroeconomic,” She said.

The government, Sri Mulyani stated, plans to optimize external funding to boost investment growth. After obtaining investment grade status from Standard & Poor’s, Indonesia now has access to global funding of up to US$700 billion which so far has not been able to enter Indonesia due to Indonesia’s rating status.

Minister of National Development Planning Bambang Brodjonegoro adding, the government is focusing to encouraging private investment this year and next year. In 2018, the investment is targeted to grow between 6.3 to 8 percent compared to last year.

Beside to improving the quality of government capital spending, the government will also encourage private involvement to support investment.The government, he said, will continue to be committed to supporting the improvement of the investment climate.

Various economic policy packages which is released by the government in the end of 2015, especially the development of industrial parks and special economic zones (SEZ) are expected to feel more impact next year. So far, two SEZ, namely SEZ Kuala Tanjung and SEZ Morowali have started operating this year.

Nevertheless, he added, the government will also maintain the growth of household consumption as main driver of GDP can be maintained at the level of 5.1 to 5.3 percent. Inflation in 2018 also will be expected to be at 2 to 5 percent to maintain purchasing power.

“There are some big events next year, such as the Asian Games, World Bank and IMF Meeting in Bali, and simultaneous regional elections in 171 territory thatwill encourage household consumption,” Bambang said.

BI Governor Agus Martowardojo commenting, the improvement of Indonesia’s GDP growth next year is in line with the improvement of the global growth rate projection. BI earlier revised its global GDP growth projection by 2018 from 3.5 percent to 3.6 percent.

“The outlook for economic recovery is underpinned by domestic demand and  investment that not only building investment but also non-building investment. In addition, government structural policy reforms will also encourage private investment,” said Agus.

From the exchange rate, BI estimates the rupiah will be at the level of Rp13.300 to Rp13.700 against U.S dollar. According to him, the rupiah in 2018 will be relatively stable despite the risks of the The Federal Reserves step to raise their rate.

The Quality of Economic Growth

The government has expressed its commitment to increasing the quality of economic growth in an attempt to help reduce poverty, unemployment and gaps.

To achieve quality economic growth, Sri Mulyani noted, the government will create more job opportunities as part of its efforts to improve peoples welfare fairly.

She said, the fiscal policy was directed to address several development challenges, including poverty and gaps reduction, improvement of productivity and fiscal capacity, as well as maintaining macroeconomic stability.

Otherwise, BI governor said, the efforts to achieve an economic growth of over seven percent must be accompanied by steps to maintain macroeconomic stability and the financial system in a way that the economy will grow at a higher pace.

He pointed out that the Indonesian economy remains stable, but the country needs to stay alert for global challenges and uncertainties, which will still cast a shadow on the Indonesian economy.

The BI has anticipated global economic pressure by strengthening the macro-prudential policy and adopting several strategies, including intensifying supervision.

Other strategies adopted by BI are strengthening crisis management and expanding communication and coordination with the Committee for Financial System Stability and the parliament on a mix policy. (RF)