Spin the Wheels of Economy

KOMPAS/PRIYOMBODO

A teller counts 100-dollar US bills on Monday (7/5/2018) at the PT D8 Valasindo money changer in Gandaria, South Jakarta.

Experts say that the recent weakening of the rupiah will have serious consequences. The government’s swift and proper response is awaited.

A serious response is urgently needed against the weakening rupiah, as it is the result of a two-pronged cause: global and domestic. The domestic cause is a fundamental one, namely the six-year current account deficit.

Globally, the United States’ normalized monetary policy of increasing its reference rate and the European Central Bank’s policy to reduce bonds purchases as of September have resulted in capital outflows from emerging markets, including Indonesia, as investors seek a larger profit margin in the US market. The US-China trade war has resulted in concerns over contractions in global economic growth, including in Indonesia.

Amid this relative dearth of good news, governments may choose to respond in line with their respective capabilities and competitiveness. We hope that the rupiah depreciation will make our exports more competitive. However, we have recorded a surplus in exports just once this year, in March.

The increasing global oil price is another important factor, considering that we are a net oil importer.

Amid the trade war between global economic giants, Indonesia is obliged to give a swift and proper response. Bank Indonesia’s (BI) decision to increase its reference rate by 0.5 percent is seen as a proper – if a little surprising – response amid the recent global developments. Nevertheless, we agree that the move will not be enough to boost our economic growth. The move must be followed by concrete and immediate actions from the government.

KOMPAS/RADITYA HELABUMI

Workers stack on Thursday (21/6/2018) bound rupiah notes that were transferred to the Bank Mandiri central cash center Jakarta from branch offices and representative offices. The rupiah exchange rate was still under pressure following the extended Idul Fitri holiday.

Several moves related to our competitive and comparative advantages as a tropical country could give us short-term gains. These include agriculture, farming, fishery, tourism and our natural resources.

Our agriculture, farming, fishery and forestry sectors need policies and strategies to increase our productivity and added value. Often, the introduction of appropriate technologies is enough to achieve this. High productivity will increase our competitiveness in both the domestic and global markets. Finding new markets will be inevitable if we speed up multilateral talks while still safeguarding our national interests.

In tourism, the government has successfully raised international awareness on Indonesia. The next step is to provide practical and concrete information on how to get to and around our various tourist destinations and to ensure our visitors’ safety. The weakening exchange rate must be turned into a boon for our tourism.

Coordinated measures between central and local governments are necessary in these initiatives. Regional heads will have a highly important role in driving the local economy in the decentralization era. This is our hope for our newly elected regional heads.