Economic growth in 2018 of 5.17 percent was the best recorded in the last four years. However, in this political year, this performance has actually sparked controversy. First, even though it was better than 2017, it was not as high as the government’s target of 5.4 percent. It was even lower than the revised target of 5.2 percent. Second, it was well short of President Joko Widodo\'s 2014 campaign promise of 7 percent. Regardless of the political debate, it must be admitted that we are trapped in a moderate growth pattern, which makes it difficult to go higher.
We experienced the peak of economic growth in 2011 of 6.5 percent. After that, growth fell to 6.2 percent in 2012 and to 5.8 percent in 2013. The main factor is that the explosion in commodity prices ended.
The slowdown in economic growth also continued to 5.01 percent in 2014 and to 4.88 percent in 2015. After that there was a reversal in direction to 5.03 percent in 2016, up again to 5.07 percent in 2017, and 5.17 percent in 2018. Growth has returned to an upward trend, albeit a slow one.
How should we get out of this moderate growth trap? First, domestic economic growth cannot be separated from the global growth pattern. Global growth has also entered a decline. The World Bank revised the 2019 global growth projection from 3 percent to 2.9 percent. Meanwhile, the International Monetary Fund has estimated this year\'s global growth to be 3.5 percent, down from 2018’s 3.7 percent.
The implication is clear in our economy, where the role of exports is increasingly shrinking. In 2018, the contribution of exports as a source of growth declined 0.99 percent, even though if seen from the previous year\'s growth it was an increase of 6.48 percent.
During the same period, imports grew 12.4 percent. In other words, we need more factors of production from abroad to drive our economy. The current account deficit is one of the acute problems that must be thoroughly addressed. Our economy can only speed up if the problem of the current account deficit is resolved, by increasing the capacity of non-oil and gas exports to non-traditional markets.
Second, our economy still relies heavily on domestic consumption. In 2018, the contribution of consumption to the economy reached 56.01 percent. Ideally, the economy should be supported by increased investment because it will increase national production capacity and per capita income. That is why one of the government\'s main agendas in the future is to invite more foreign direct investment. Infrastructure development and facilitating domestic business through deregulation are important steps that must be continued.
However, in the economy, one factor cannot be pushed forward without taking into account other factors within the framework of general balance. Our efforts to encourage infrastructure development, besides being hindered by financing problems, also burden our imports. This is because many raw materials are not available domestically. So in encouraging investment in the manufacturing sector, there are still many imported raw materials and auxiliary materials.
To drive investment, especially in the manufacturing sector, we must pay attention to several things, such as prioritizing export-oriented sectors and trying to build medium-sized industries that produce raw materials and auxiliary materials. It is not easy to move this sector because the investment needed is high and the profit margins are small. This is where the role of tax incentives and the relaxation of regulations are important for the middle sector industry.
The slowdown in global economic growth due to the dispute between the United States and China provides an opportunity because many Chinese-based companies will relocate their businesses to avoid the application of tariffs when entering the US market.
With some effort, we have the potential to attract the relocation of several product lines that are in accordance with the production supply chain in Indonesia. Therefore, we have the opportunity to increase foreign direct investment even though the global economic sky is increasingly cloudy.
Third, the contribution of the processing industry sector must continue to be improved. In 2018, the contribution of the processing sector to the economy was 19.86 percent, the highest of all sectors. It was followed by the trade sector with a contribution of 13.02 percent, agriculture 12.81 percent and construction 10.53 percent.
Nevertheless, the growth of the manufacturing sector has tended to decline. From 4.64 percent in 2014 it declined to 4.27 percent by 2018. However, without systematic effort as part of a directed industrialization strategy, the role of the manufacturing industry will not increase.
From 2010 to 2015, average domestic economic growth was 5.63 percent, while from 2016 to 2018 it was just 5.09 percent. Of course, spurring growth must be gradual, it cannot accelerate so fast as there are many structural problems that are obstacles and must be broken down one by one.
The moderate growth trap must also be avoided so as not to stagnate. Stagnation of economic growth will prevent us from transitioning into a developed country. Although 2018 per capita income rose in rank, it belonged to the upper middle-income group, but if stagnation in growth is not resolved, we will be trapped in the middle-income country group.
It is clear here that infrastructure development is just a basic prerequisite. There are also still issues surrounding human resources in manufacturing industries, especially export-oriented ones. However, there are no shortcuts, we must be consistent and sustainable.
Whoever is elected president in this year\'s election must be able to break down the growth trap in order to grow faster. Without thorough efforts that touch on structural aspects, the economy\'s performance will get “hot” in an unsustainable way.
A PRASETYANTONO, Lecturer at Atma Jaya Catholic University Jakarta