Based on this condition, economic observers are generally optimistic that 2018 will be better despite a number of external threats
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Mainly as a result of weaker public consumption, the national economy grew only 5.07 percent in 2017, below the government target of 5.2 percent.
Ironically, the stagnant growth happened amid the relatively stable macroeconomic condition and improving global perception of the Indonesian economy. The latest International Monetary Fund (IMF) report also praised the general performance of the national economy.
Besides the stagnant trend, current growth is also less able to absorb labor. The weak purchasing power and consumption of lower-income people shows that economic growth and various government development programs have not directly affected the people at the lowest levels.
Therefore, we are expecting a number of government breakthroughs this year to balance out the massive development of infrastructure projects with labor-oriented social spending programs that will have a direct impact on purchasing power, social welfare and poverty alleviation.
Household consumption – contributing 56.13 percent of GDP – weakened from 5.01 percent in 2016 to 4.95 percent in 2017. The sluggish consumption was caused mainly by inflationary pressure. Therefore, maintaining purchasing power is one of the major challenges in 2018 if we want to achieve this year’s growth target.
Meanwhile, other contributors to GDP, such as investment, showed strong growth of 6.15 percent, backed by the aggressive development of various state infrastructure projects and increasing private investment. Exports also showed positive performance, growing 9.09 percent and contributing 20.37 percent to GDP in 2017, triggered by rising commodity prices. The real sector showed relative movement, reflected in the growing industrial sector, including trade, which was initially predicted to plummet following the closure of a number of notable outlets.
Based on this condition, economic observers are generally optimistic that 2018 will be better despite a number of external threats, such as the impact of increased US interest rates and rising crude oil prices, which still need to be watched. The potential for better growth in 2018 is supported mainly by the stable export performance and high growth in investment since the fourth quarter of 2017. As long as we can maintain investment growth and improve export growth, it is likely the 2018 growth target will be achieved.
The optimism for 2018 is also supported by the simultaneous regional elections and hosting the Asian Games, which is expected to drive the economy through a sharp rise in advertising and public spending. To encourage public consumption and the people’s purchasing power, it is important for us to keep inflation low, especially in the prices of food and basic commodities.
Our experience in disorganized food management over the last several years should be a lesson to avoid repeat cases. We also have to keep an eye on the price pressure on crude oil, which could trigger hikes in fuel prices and electricity rates and that could push back people\'s purchasing power. This step has to be accompanied by efforts to create as many jobs as possible.
The wheel of the economy will turn quickly with healthy growth in all component contributions to GDP. Here, it is important to maintain stimulus, a conducive climate and the trust or optimism of consumers, investors and business players.