Recession and slowing economic growth in a number of countries will overshadow the global economy next year. Indonesia will have to boost exports and investment to cope with it.
By
·4 minutes read
JAKARTA, KOMPAS— Recession and slowing economic growth in a number of countries will overshadow the global economy next year. Indonesia will have to boost exports and investment to cope with it.
Indonesia is considered to have the advantage of its domestic economic potential. To escape the pressure of the global economy, Indonesia must optimize its economic potential, especially during the remaining 1.5 months of this year.
The International Monetary Fund (IMF) and the World Bank expect the Indonesian economy to grow 5.1 percent in 2020, while the Asian Development Bank (ADB) sees 5.2 percent. As for this year, the IMF and World Bank expect economic growth of 5 percent and the ADB has forecast 5.1 percent.
According to Hendri Saparini, founder of the Center for Reform on Economics (CORE), the most important thing now is to respond to uncertainties in economic conditions. In Indonesia, the economy can be boosted through household spending and investment. The contribution of household spending to the gross domestic product (GDP) ranges from 56 percent to 57 percent, while the contribution of investment is between 30 percent and 32 percent.
"If we can find the right way to boost both consumption and investment, we should be able to maintain at least 80 percent of Indonesia\'s economic growth resources," Hendri said on the sidelines of CORE Economic Outlook: Indonesia in 2020 and Beyond, held in Jakarta on Wednesday.
Meanwhile, exports contribute less to the economy because Indonesia is late in economic transformation. "In the 1990s to 2000s, Indonesia\'s exports were dominated by the manufacturing industry. However, in the following years, the economy was dominated by raw materials," said Hendri.
Based on data from Statistics Indonesia (BPS), the Indonesian economy grew 5.02 percent in the third quarter of 2019. The chairman of the Indonesian Employers\' Association (Apindo), Hariyadi Sukamdani, suggested that, in the remaining 1.5 months of this year, Indonesia focus on the domestic market. "Efforts to support the growth of small and medium businesses and tourism should be prioritized," he said.
Tourism should also be further promoted as the main foreign exchange earner. This year, foreign exchange from this sector is expected to reach US$20 billion.
According to Hariyadi, Apindo is of the opinion that there are two key steps to be taken to improve the condition of the Indonesian economy. First, to increase employment. Second, to encourage the development of micro, small and medium enterprises (MSMEs) so that they can take over the business that has so far been handled by labor-intensive industry.
Tourism should also be further promoted as the main foreign exchange earner. This year, foreign exchange from this sector is expected to reach US$20 billion.
On a separate occasion, Bank Danamon Indonesia economist Dian Ayu Yustin said there were no indications of the US-China trade war ending soon. In addition, there was the threat of economic turbulence as a result of the Brexit process and the US elections, she added.
In a number of countries, including the US, China and the UK, economic growth slowed in the third quarter of 2019. Vietnam is one of the exceptions, where economic growth rose from 6.7 percent in the second quarter to 7.1 percent in the third quarter. However, Vietnam\'s capacity to accommodate industrial relocation -- as a result of the US and China trade war -- is limited, thus creating opportunities for Indonesia.
"Efforts are needed to focus on investment, such as though reforms and the simplification of regulations, improved productivity and human resources," Dian said in a press conference for The Indonesia Summit 2020.
The manufacturing sector contributes around 20 percent to the economy.
Priority sectors in future economic development are food and beverages, textiles, the automotive industry, electronics and chemicals. The manufacturing sector contributes around 20 percent to the economy.
Bank Danamon Indonesia President Director Yasushi Itagaki said the challenges of the global economy would become an opportunity if investment could be increased. At present, businesses were still unsure about investing and expanding, he added.
Human Resources
Rizal Affandi Lukman, undersecretary for international economic cooperation at the Office of the Coordinating Economic Minister, said Indonesia could not achieve the target of a $7 trillion GDP at average annual economic growth of 5 percent. To achieve that target, Indonesia needed 7 percent annual economic growth, he said. Therefore, human resources should play an important role.
"Strengthening the quality of human resources will have an impact on increasing productivity and income so as to drive the economy," said Rizal.
Separately, Communications and Information Minister Johnny G Plate said the digital economy had multiple impacts on Indonesia\'s economic growth. Therefore, industries related to the delivery of goods, telecommunications and e-commerce should be further encouraged, he said.
"Indonesia in the future will depend on digital technology and the readiness of human resources in the economic transformation," Johnny said during the opening of the National Post and Informatics Convention in Jakarta on Wednesday. (CAS/LKT/ KRN/JUD/ERK)