Remaining Optimistic in Face of Challenges in 2019

KOMPAS/RADITYA HELABUMI

Vice President Jusuf Kalla (second left) accompanied by (left to right) the chairman of the board of commissioners of the Financial Services Authority (OJK), Wimboh Santoso, Coordinating Economic Affairs Minister Darmin Nasution and Bank Indonesia Governor Perry Warjiyo, makes a press statement after attending the 2019 Financial Services Industry Annual Meeting in Jakarta on Friday ( 11/01/2019). The meeting was held by the Financial Services Authority (OJK) with the theme "Collaboration to Build Optimism and Acceleration of Sustainable Growth".

JAKARTA, KOMPAS – Economic challenges will continue this year. Synergy and cooperation are needed to cope with them.

All parties must establish synergy to face external and internal challenges that are to occur this year. Collaboration is considered the key to deal with these challenges.

In 2018, Indonesia overcame challenges and market turmoil thanks to collaboration and synergy among all parties. This year, the same strategy is to be implemented. "We are optimistic that we will be able to face 2019," Vice President Jusuf Kalla said at the 2019 Financial Services Annual Meeting held by the Financial Services Authority (OJK) in Jakarta on Friday night.

The Vice President said that 2018 was full of challenges, as did the chairman of the OJK, Wimboh Santoso. According to him, Indonesia was able to safely pass through the volatility of 2018.

Collaboration was the key to Indonesia\'s success. "Synergy between the OJK, relevant ministries, institutions and employers is needed. With synergy and collaboration, we will be able to face the challenges," Wimboh said.

In its 2019 Global Economic Prospect report released on Wednesday, the World Bank reduced its global economic growth forecast from 3 percent to 2.9 percent. The economic growth in developed countries is predicted to be 2 percent this year, while the economies of developing countries are predicted to grow by 4.2 percent.

The World Bank said in its report that the global economic situation is "increasingly bleak" because manufacturing and international trade will slow down, trade tensions will grow and the majority of developing countries will experience significant pressure on their financial markets. The 2019 State Budget projects Indonesia’s economy to grow 5.3 percent.

Threat

Kalla said that Indonesia\'s economy still had to face the impacts of the United States-China trade war, Brexit and the Middle East conflicts. Indonesia needs to increase exports and investments to be able to maintain economic growth.

Foreign direct investments that enter Indonesia should be used to develop import substitution industries. The government has promoted infrastructure development to reduce logistics costs. The coordination between the banking sector and capital market should also be closely monitored because their activities affect each other. High bank deposit rates would discourage investors to invest in the capital market.

However, the financial services industry is expected to remain optimistic about business opportunities this year because the US central bank, the Federal Reserve, is expected to not be as aggressive as last year in raising its benchmark interest rate. Global funds are expected to flow again to developing countries, including Indonesia.

The optimism can also be driven by a stronger rupiah, which continues to strengthen against the US dollar. Based on the Jakarta Interbank Spot Dollar Rate reference rate, the rupiah rose to 14,076 per US dollar on Friday. In 2018, the rupiah was under pressure. It weakened to its lowest level of 15,253 per US dollar on Oct. 11. However, starting Nov. 5, the rupiah began to recover and rose from the level of 15,000 per US dollar to the range of Rp 14,000 per US dollar.

Separately, an economist at the Institute for Development of Economics and Finance (Indef), Rusli Abdullah, said the financial markets should be further expanded and deepened to improve financial literacy. "The middle class must be encouraged to save and invest rather than spend money abroad," he said.

Bank Indonesia (BI) is optimistic that Indonesia\'s economic growth can be maintained in 2019 thanks to strong domestic demand. Nevertheless, BI will continue to closely watch internal and external challenges. BI’s deputy governor, Dody Budi Waluyo, said in Jakarta on Friday that the internal challenge would include the trade balance deficit. This year, the trade balance will still be under pressure from high imports. "The trade balance will continue to suffer a deficit, but the trend is declining," Dody said.

The external challenges would include the Fed\'s interest rate hike, which is expected to continue this year, and the growing uncertainty in global trade caused by the trade war, which is also expected to have an impact on the Indonesian economy. (LSA/LAS/E1)