Indonesia’s Economy Stuck with 5 Percent Growth Rate
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Indonesia’s Economy Stuck with...
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Indonesia’s Economy Stuck with 5 Percent Growth Rate
Household spending as one component of overall economic growth only grew by 2.73 percent last year, far down from the rate of 5.04 percent seen in 2009.
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·4 minutes read
JAKARTA, KOMPAS—The Indonesian economy grew by 5.02 percent in 2019, the lowest rate since 2016. The economic growth trend, which had pointed upward between 2015 and 2018, has changed direction. Indonesia has not managed to break out from the 5 percent growth rate.
In 2015, Indonesia\'s economy grew 4.88 percent. That growth rate increased consecutively in 2016, 2017 and 2018 to 5.03 percent, 5.07 percent and 5.17 percent respectively.
Household spending as one component of overall economic growth only grew by 2.73 percent last year, far down from the rate of 5.04 percent seen in 2009.
Imports of goods and services contracted 7.69 percent, while exports fell 0.87 percent from the figures of 2018. In fact, in 2018, imports of goods and services had grown by 11.88 percent as exports of goods and services had risen by a lower 6.55 percent.
The head of macroeconomic studies at the Institute for Economic and Social Research, Economics and Business, University of Indonesia (LPEM FEBUI), Febrio Kacaribu, said sluggish business activity and the temporary suspension of several infrastructure projects had slowed down investment growth. "It is possible that investment will grow in 2020 if the government maintains a [favorable] investment climate," he said.
Data from the Investment Coordinating Board (BKPM) show that realized investment reached Rp 809.6 trillion in 2019. The amount consisted of Rp 423.1 trillion in foreign investment and Rp 386.5 trillion in domestic investment.
Association of Indonesian Food and Beverage Producers chairman Adhi S Lukman said private consumption should be increased to boost economic growth. Government spending could trigger private-sector growth and increase consumption. "As for exports, there should be new efforts to find new markets with a bilateral approach," he said.
Regarding economic growth in 2019, President Joko “Jokowi” Widodo said the 5.02 percent growth rate reflected a relatively good fiscal policy.
"It is this kind of optimism we need to show, and we should not be pessimistic. We must be optimistic, because global trust in us is improving, "said the President at the State Palace.
Alert
BPS data show that growth in the processing industry weakened quite significantly, falling from a rate of 4.27 percent in 2018 to just 3.8 percent in 2019.
BPS head Suhariyanto said the slowdown in growth of the processing industry must be watched, because it would have a major effect on Indonesia\'s overall economic growth, as the processing industry contributed 19.7 percent to Indonesia\'s gross domestic product (GDP).
"The decline in the growth of the manufacturing industry should be watched; it plays a key role in the structure of the economy," he said.
Indonesia\'s 2019 GDP based on current prices is Rp 15.83 quadrillion, GDP per capita is Rp 59.1 million or US$4,174.9.
The slowdown in growth is shown in the decline in imports of raw materials. Imports of raw and auxiliary materials were worth $125.90 billion in 2019, down 11.07 percent year-on-year.
Industry Minister Agus Gumiwang Kartasasmita said the government had prepared strategic steps to improve the processing industry. The steps included the supply of raw materials, the establishment of industrial estates outside of Java, the empowerment of small and medium enterprises as well as improved waste management.
"For the first strategy, we will reduce the gas price to $6 per million metric British thermal unit (mmbtu) to increase competitiveness," he said.
Challenge
Speaking at the Mandiri Investment Forum 2020, Coordinating Economic Minister Airlangga Hartarto expressed confidence that, in the midst of various uncertainties affecting the world economy, Indonesia\'s economic fundamentals remained good.
The sluggish global economic growth also affected Indonesian exports and imports.
Finance Minister Sri Mulyani Indrawati said the unfavorable state of the global economy was a major challenge in managing state finances. The sluggish global economic growth also affected Indonesian exports and imports.
Sri Mulyani said the volume of world trade only grew around 1 percent, the lowest rate in the last few years. "We continue to try to think about what policy options and instruments are available in accordance with the fiscal and monetary space we have," she said.
Meanwhile, Bank Indonesia Governor Perry Warjiyo said the strong synergy between monetary and fiscal policy in Indonesia, innovation, and economic transformation were the factors that kept the Indonesian market attractive to investors. (KRN/DIM/CAS/NTA)