Obstacles Growing Increasingly Complex

KOMPAS/HERU SRI KUMORO

Indonesia had the potential to become a high-income country, provided that the country’s demographic bonus was used productively.

JAKARTA, KOMPAS – Indonesia is facing increasingly complex challenges in achieving its 5.2 percent economic growth target this year. Pressures persist not only from global uncertainties, but also from domestic political dynamics and low productivity.

The Asian Development Bank’s (ADB) July issue of the Asian Development Outlook Supplement projects 6 percent economic growth in the Asia-Pacific this year and 5.9 percent in 2019. Indonesia has revised its 2018 economic growth projection from 5.3 percent to 5.2 percent.

ADB economic analysis and operational support director Edimon Ginting told Kompas that the pressures on Indonesian economic growth were not only external, such as the US-China trade war, and that it was also hampered by domestic political dynamics and low productivity.

Therefore, the government should immediately prepare measures to anticipate the impacts from these two factors in order to achieve this year’s economic growth target of 5.2 percent. Investor trust must be nurtured and economic growth should not be supported mainly by consumption.

“As a developing country, exports, rather than consumption, is important for boosting economic growth,” Edimon said on Thursday (9/8/2018) on the sidelines of the 20th Indonesian Economists Association (ISEI) national seminar and congress in Bandung, West Java.

Edimon said that developing countries in the Asia-Pacific were making serious efforts to boost exports to boost their economies. Thailand, Vietnam and South Korea were developing their export strategies through market and product diversification. They no longer relied on commodities, and were able to curb the impact of currency depreciation. Therefore, strategies to increase exports must be concrete and comprehensive.

Indonesian Chamber of Commerce (Kadin) export development standing committee chair Handito Joewono said that exports could be optimized through developing the digital economy. E-trade posed huge export potential as the number of consumers continued to grow.

The January editions of the “We Are Social” and “Hootsuite” reports showed that 28.07 million customers in Indonesia purchased consumer goods through e-trade platforms in 2017, a 13 percent year-on-year increase.

Coordinating Economy Minister Darmin Nasution said Indonesia had good economic growth as reflected in its above-5-percent growth, the consistently decreasing number of poor people, improvements in gaps and controlled inflation.

Bank Indonesia Governor Perry Warjiyo said Indonesia had the potential to become a high-income country, provided that the country’s demographic bonus was used productively. “If our demographic bonus turns out to be a problem, Indonesia will fall into the middle-income trap,” Perry said.

Market expectations

The Indonesian Composite Index (IHSG) has been running on empty in its upward journey. Market players are waiting for the end of the candidate registration for the presidential election at midnight on Saturday (11/8/2018). On Saturday, the IHSG fell 0.485 percent to close at 6,065.256.

MNC Securities research head Edwin Sebayang reaffirmed that IHSG growth could be maintained if the candidates followed with market expectations.

Bank Indonesia international department director Erwin Haryono said that, amid the rupiah’s weakening against the US dollar, business players could use the Bilateral Currency Swap Arrangement (BCSA) for bilateral trade and investment. Using the currency of trade partners could reduce their dependency on the US dollar. (KRN/DIM/HEN)