CMEA Darmin Nasution said Indonesia should take an advantage of the demographic bonus as possible - Photo by TheInsiderStories

JAKARTA (TheInsiderStories) – Governor of Bank Indonesia (BI) Perry Warjiyo still optimistic current account deficit (CAD) will ended at 2.8 percent by the end of this year, even in the first half of 2019 the position still at 3 percent of gross domestic product (GDP).

On Friday, the central bank announced the country’ CAD widened to US$8.4 billion in the second quarter (2Q) of 2019. Its higher from the previous quarter which worth of $7 billion or 2.6 percent of GDP

The deficit was influenced by the repatriation payment, dividends and foreign debt payments. In addition, it was also caused by slowing global economic growth and the declining of world commodity prices.

“BI sees the capital account surplus can still finance the current deficit until the end of this year. We believed the CAD will closed at 2.8 percent of GDP,” Warjiyo told reporters today (08/09) at his office.

He reported, until August 8, 2019, foreign inflows recorded Rp179.6 trillion ($12.56 billion), consisting of Rp113.7 trillion into State bond and Rp65.9 trillion into stock market. Overall this showed that investors still confident on the Indonesian economy, said Warjiyo.

Previously, Indonesia’ president Joko Widodo has criticized his ministers due to the country’s widening current account deficit. In a plenary cabinet session at Presidential Palace in Bogor, West Java on July 8, the president criticized his minister performance who were considered to be not maximal enough to overcome national economic problems, especially about imports and exports.

“We need to look at the figures obtained by the statistics agency’ data. This is careful, which is related to exports and imports,” said Widodo.

He asked the ministers to look at the figures and question why the value of imports was so high. He insinuated the relevant ministers to fix this problem. Starting from the energy and mineral resources minister Ignasius Jonan, state-owned enterprises minister Rini Soemarno, to the investment coordinating board chief Thomas Trikasih Lembong.

Regarding exports, the former governor of Jakarta said Indonesia had a great opportunity for exports, especially after the trade war between the United States (US) and China. According to Widodo, the opportunity for country’ exports to the US is enormous because of the imposition of tariffs on products from China.

“This is our chance to increase the capacity of factories, existing industries. But once again the government should provide incentives for existing opportunities. If we are just a routine, we cannot give special incentives for exporters, both those who small, large and medium, or incentives in the form of interest, for example, it is difficult for them to penetrate, both to the market, which I shared and new markets that exist,” said the Indonesian leader.

Beside the matter of exports and imports, Widodo also mentioned investment. The president reminded that he had said dozens of times that investments related to exports, investments related to import substitution, must be granted as soon as possible.

Widodo also has criticized his ministers for introducing new regulations that discourage investments and are not in line with his push for economic growth. He claimed 23 new regulations prevented easy investment. He said that the regulations were not included in the economic packages that had been issued by the government.

The president called on his ministers and other relevant officials to revise their “problematic” regulations to help the government attract more foreign investment. He said that such regulations may disrupt the economic growth target.

While, Coordinating Minister for Economic Affairs Darmin Nasution opined, for the success of economic transformation in Indonesia, its needed coherent synergy between fiscal and monetary side. Both are like two sides of a coin, interconnected and there should not be another policy disagreement with the other side, he adds.
Ten years ahead, he continued the country should take an advantage from the demographic bonus as possible by boost the economic growth and the competitiveness. Finance Minister Sri Mulyani Indrawati echoed the senior minister, all resource should be used to achieve the momentum.
As the controlling fiscal policy, she said, the ministry continues to formulating the policy mix to maintain the economic growth momentum. “Fiscal instruments have very much to attract the attention of private enterprises, including Viability Gap Fund, Project Development Facility, and the availability of payment to finance the infrastructure projects,” she opined.
Indrawati stated, going forward, the ministry of finance and BI will continue to design Indonesia’ macroeconomic policy mix conducive while maintaining stability, since the country operating in a very dynamic global environment.
Warjiyo added, the central bank is optimistic that the economy will continue to improve despite the current economic growth is still in the range of 5.2 percent. There are five policy that BI has been produced to support the growth such as relaxes the ratio of loan to value, raising the ratio of financing-funding, electronification and digitization of the payment system, the deepening of financial markets, and sharia economy.
“After last month we lowered the reserve requirement, we also have lowered interest rates by 25 bps. Going forward, we still have room to make monetary policy accommodative, either every additional liquidity and lower interest rates. Then, to note also how the synergy between BI and the government, the private sector and banks,” he stated.
Furthermore, the Head of the Investment Coordinating Board Thomas Lembong highlighted, every country that developed economies are always preceded by a friendly policy towards foreign capital inflows. By opening up to foreign investment, he assured will create a more entrepreneurial and employment.

by Linda Silaen, Email: linda.silaen@theinsiderstories.com