The global economic landscape is shifting and changing. New economic growth models are needed for the economy to remain resilient and sustainable.
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Antara Foto/Sigid Kurniawan
Finance Minister Sri Mulyani Indrawati (right), IMF managing director Christine Lagarde (second left) and Singaporean Deputy Prime Minister Tharman Shanmugaratnam (second right) speak on global economic development at an international conference in Jakarta on Tuesday (27/2). The conference, titled “Models in a Changing Global Landscape”, is part of the IMF-World Bank Annual Meetings 2018, with the main meeting scheduled to be held in Bali in October.
JAKARTA, KOMPAS — The global economic landscape is shifting and changing. Industry 4.0, or the rapidly growing fourth industrial revolution, has increased volatility in financial markets, seen the tightening of trade and has the potential to disrupt various sectors of the national economy.
To address these problems, new economic growth models are needed for the economy to remain resilient and sustainable. There are three keys to sustaining economic growth in the changing global landscape: managing uncertainty, making the economy more inclusive and reinforcing sectors that face potential disruption by the digital revolution.
These statements were raised during the seminar "High Level Conference Annual Meetings 2018: New Growth Models in a Changing Global Landscape", in Jakarta, on Tuesday (27/2).
The seminar, held jointly by Bank Indonesia and the International Monetary Fund (IMF), was attended by, among others, IMF Managing Director Christine Lagarde, Governor of Bank Indonesia Agus DW Martowardojo, and Finance Minister Sri Mulyani Indrawati.
Lagarde said the global economy was expected to grow positively this year at 3.9 percent. This is good news for Indonesia as the country’s economy is estimated to grow 5.3 percent this year.
On the other hand, however, the global economy is shifting. Volatility in financial markets is on the rise and trade is tightening. Rapid technological advances such as digitalization, robotics and artificial intelligence are growing rapidly. "If it is not anticipated, it will disrupt various sectors of the economy and become a barrier to growth," she said.
According to Lagarde, Indonesia and developing countries in ASEAN needed new economic growth models to face the challenge. There are three key ways to meet the challenges: managing uncertainty, making the economy more inclusive, and preparing sectors that could be potentially disrupted by the digital revolution.
"In the financial sector, policymakers need to remain vigilant of the impact of the shifting global economy on the stability of the financial system, especially changes in global capital flows. Fiscal reform and the deepening financial markets is necessary,” Lagarde said.
Lagarde said that economic development in the infrastructure sector alone was not enough. Economic development should also be directed toward human development, such as improving the quality of education, access to finance and economics to reduce income inequalities and empowering women.
In addition, she also emphasized the importance of addressing the digital revolution. The digital revolution has changed the pattern of work and the economic structure. Citing McKinsey\'s research, Lagarde said about 60 percent of jobs would soon be replaced by machines or automation.
"We need to also think about the future of labor, especially in the midst of demographic bonuses. Employment creation and creating a future education system needs to be thought of by policymakers," he said.
In addition, Lagarde said, the economic diversification of a country was important. One way is through export diversification. IMF’s analysis shows that an increase in a country\'s exports could have a significant impact on the increase of gross domestic product (GDP). A small increase in export diversification could boost GDP growth by 1 percent.
Kompas/Wisnu Widiantoro
During their visit to Tanah Abang Market in Central Jakarta, (from left) IMF managing director Christine Lagarde, President Joko Widodo, Jakarta Governor Anies Baswedan, Finance Minister Sri Mulyani Indrawati and Bank Indonesia Governor Agus Martowardoyo speak to journalists on Monday (26/2). The President and Lagarde also visited Pertamina Hospital to observe its healthcare services under the Healthy Indonesia Card program.
Indonesia\'s efforts
Agus DW Martowardojo said Indonesia had sought to maintain macroeconomic stability and financial system stability. Evidently, the Indonesian economy continues to grow despite the global economic turmoil.
"In addition to maintaining macroeconomic stability and financial system stability, Indonesia needs to find new sources of economic growth. There are at least three sectors that will support new economic growth, namely tourism, maritime industries and the sharia economy," said Agus.
Meanwhile, Sri Mulyani said that infrastructure development was needed in Indonesia to drive the economy. This infrastructure included telecommunication infrastructure to provide access to the digital economy for people in rural areas.
Indonesia has also reformed its education system, including vocational education. In the digital economic sector, Indonesia also facilitates the growth of startup companies. The government hopes the startup companies can help solve a range of problems in Indonesia. "In the development of the digital economy, we also focus on consumer protection, including consumer data security," she said.
The chairman of the Monetary Authority of Singapore, Tharman Shanmugaratnam, said Asian nations had proven resilient in the face of global economic turmoil over the past two decades. This cannot be separated from the development of an inclusive economy and social safety net for the poor.
