MARKET DEVELOPMENT
RI Relies on ‘Government Breakthroughs
RI Relies on ‘Government Breakthroughs
07/11/2014 (Jakarta Post) - Indonesia’s economy has staggering throughout this year, but it may pick up pace next year because of a new government pledge to realize some key projects to boost domestic consumption, a research institution forecasts.
The country’s economy will be likely to expand by 5.6 percent in 2015 in line with the government’s target, primarily driven by government spending that can drive domestic consumption, according to the Center of Reform on Economics (CORE).
“We expect that the government’s expenditure will bring some breakthroughs. There have a been a lot of promises made by the Jokowi administration, such as the development of infrastructure using funds transferred from fuel subsidies,” CORE executive director Hendri Saparini said in a seminar on Thursday, referring to the government of President Joko “Jokowi” Widodo.
Southeast Asia’s largest economy grew by a mere 5.01 percent in the third quarter of this year, its slowest rate since 2009, with exports being the main drag on its performance, according to the Central Statistics Agency (BPS) recently.
Another key driver of higher growth will be direct investment in the real sector, which will be enabled by increasing confidence in an enhanced business climate in Indonesia, as the new government takes office.
CORE says RI economy will expand by 5.6% based on govt spending
Breakthroughs expected in the development of infrastructure
Key driver to higher growth will be direct investment in real sector
“The government is projected to offer enormous room for foreign investors to invest in various strategic infrastructure projects, such as electricity and gas,” the research body said in its report.
The government has officially targeted to grow the economy by 5.5 percent throughout this year and 5.6 percent next year.
In the third quarter of this year, two main drivers — investment and consumption — could only surge by 5.4 percent and 4 percent respectively, lower than the same quarter last year.
Exports contracted by 0.7 percent in the July-October period. Primary commodities such as coal, palm oil and rubber made a significant contribution to the country’s exports, which in the first three quarters amounted to US$132.71 billion, down by 0.93 percent from a similar period last year.
Indonesia has been trying to spur growth in its downstream industry by processing its agriculture produce and minerals in the past years, but with many issues at hand, such as poor infrastructure, progress has not been impressive.
According to CORE, next year will be a “decisive moment” for Indonesia to determine its future position in the global and regional arenas and will be a time to “re-invent economic priorities” to enable it to reap the biggest economic benefits.
One of the highest priorities for the country will be to reshape its export strategy, for instance by mapping out different types of commodities and goods to sell in specific markets, and to further spur growth in its downstream industry and make production more efficient.
Jayati Ghosh, an economist from Jawaharlal Nehru University of India, said export-oriented strategies were not reaching limits and would be less likely to be successful in the current global context, thereby a shift to new strategies oriented to domestic and regional demand would be necessary, notably for developing countries like Indonesia.
But to do this, countries would be required to be pro-active in terms of trade and industrial policies.
“We must generate domestic production capacity and make them competitive and you can’t do that without active trade and industry policies,” she said.
Jayati further said that more systematic efforts would be essential to change production structure, which was heavily reliant on primary commodities to manufactured goods.
The country’s economy will be likely to expand by 5.6 percent in 2015 in line with the government’s target, primarily driven by government spending that can drive domestic consumption, according to the Center of Reform on Economics (CORE).
“We expect that the government’s expenditure will bring some breakthroughs. There have a been a lot of promises made by the Jokowi administration, such as the development of infrastructure using funds transferred from fuel subsidies,” CORE executive director Hendri Saparini said in a seminar on Thursday, referring to the government of President Joko “Jokowi” Widodo.
Southeast Asia’s largest economy grew by a mere 5.01 percent in the third quarter of this year, its slowest rate since 2009, with exports being the main drag on its performance, according to the Central Statistics Agency (BPS) recently.
Another key driver of higher growth will be direct investment in the real sector, which will be enabled by increasing confidence in an enhanced business climate in Indonesia, as the new government takes office.
CORE says RI economy will expand by 5.6% based on govt spending
Breakthroughs expected in the development of infrastructure
Key driver to higher growth will be direct investment in real sector
“The government is projected to offer enormous room for foreign investors to invest in various strategic infrastructure projects, such as electricity and gas,” the research body said in its report.
The government has officially targeted to grow the economy by 5.5 percent throughout this year and 5.6 percent next year.
In the third quarter of this year, two main drivers — investment and consumption — could only surge by 5.4 percent and 4 percent respectively, lower than the same quarter last year.
Exports contracted by 0.7 percent in the July-October period. Primary commodities such as coal, palm oil and rubber made a significant contribution to the country’s exports, which in the first three quarters amounted to US$132.71 billion, down by 0.93 percent from a similar period last year.
Indonesia has been trying to spur growth in its downstream industry by processing its agriculture produce and minerals in the past years, but with many issues at hand, such as poor infrastructure, progress has not been impressive.
According to CORE, next year will be a “decisive moment” for Indonesia to determine its future position in the global and regional arenas and will be a time to “re-invent economic priorities” to enable it to reap the biggest economic benefits.
One of the highest priorities for the country will be to reshape its export strategy, for instance by mapping out different types of commodities and goods to sell in specific markets, and to further spur growth in its downstream industry and make production more efficient.
Jayati Ghosh, an economist from Jawaharlal Nehru University of India, said export-oriented strategies were not reaching limits and would be less likely to be successful in the current global context, thereby a shift to new strategies oriented to domestic and regional demand would be necessary, notably for developing countries like Indonesia.
But to do this, countries would be required to be pro-active in terms of trade and industrial policies.
“We must generate domestic production capacity and make them competitive and you can’t do that without active trade and industry policies,” she said.
Jayati further said that more systematic efforts would be essential to change production structure, which was heavily reliant on primary commodities to manufactured goods.