How Must We Do To Boost Indonesia’s Economic Growth?

How Must We Do To Boost Indonesia’s Economic Growth?

Indonesia’s annual economic growth grew more slowly than expected in the second quarter, with growth in some key sectors slowing and pivotal private consumption remaining sluggish. Southeast Asia’s largest economy grew 5.01 percent in April-June from a year earlier, slower than expected and unchanged from the first quarter’s pace.

Indonesia’s annual inflation rate cooled in July, the statistics bureau said on Tuesday, as expected, as demand normalized after Idul Fitri holidays. Consumer prices rose 3.88 percent in July from a year ago, close to the 3.87 percent expected in a Reuters poll. June’s annual inflation rate was 4.37 percent, the fastest pace since March 2016.

Indonesia’s central bank targets headline inflation rate at 3-5 percent this year. The consumer price index rose 0.22 percent on a monthly basis. The annual core inflation rate, which excludes government-controlled and volatile food prices, slowed to 3.05 percent in July, from 3.13 percent in June. The poll had forecast 3.08 percent. Bank Indonesia has held its benchmark interest rate steady at 4.75 percent since October 2016. The central bank will meet for its next policy review on Aug. 21-22.

Indonesia has been struggling to accelerate growth meaningfully to create jobs and improve the livelihood of its 250 million population. Many analysts say a 5 percent growth rate is not enough. President Joko “Jokowi” Widodo promised to revive growth to 7 percent during his five-year term, which will end in 2019. This year, he had to settle for a 5.2 percent growth target.

Private consumption, which accounts for more than half of Indonesia’s gross domestic product, expanded slightly faster in the second quarter compared to the first quarter, but grew more slowly against a year ago.

A slowdown in growth of debit transactions, which could indicate “people psychologically holding back spending to see what’s going on in the global economy”. By sector, growth in trade also slowed, which attributed to “a slowdown in domestic goods production and supply of imported goods”. Growth in manufacturing and agriculture sector also cooled. The benchmark stock index showed little reaction to the data and maintained a 0.5 percent gain, and the rupiah was also little moved.

Meanwhile, Bank Indonesia Governor Agus Martowardojo flagged a possibility of monetary policy easing to add to a host of measures the central bank has taken to try to stimulate demand. BI last year cut its benchmark rate six times, to 4.75 percent, and eased lending rules. The government has obtained parliamentary approval to increase spending this year, including on infrastructure, which should aid growth in coming quarters. But it remains to be seen if the economy would respond to more fiscal and monetary stimulus.

Boosting National Economic Growth

Boosting national economic growth has been efforting the Jokowi’s administration because national economic steadiness has been determinating our national economic growth will be on target eventhough its any possibilities if in the coming years will be happened uncertainty decade which is trigerred many factors such as global low oil price, unfinished Middle East and Korean peninsula conflicts and the effect of global warming.

However, to boost national economic growth, the government must give a big attention to private consumption and inflation rate because those will be determined national economic growth shall grow or stay on its position.

A private consumption will raise or down its depend on global and national economic and politic consumption. If we can maintain our national stability, its can be pushed public demand will raise. However, a private consumption can accelerate and create many products, and its will be impacted most of private sector will be absorbed many of an employee, so that it can cut unemployment situation in Indonesia.

Besides improving a private consumption, other efforts which can do by the government is how to make growth in trade will real. Making growth in trade will real depend on how many domestic products can supply; how big public consumption frequences and law enforcement firmly.

Developing growth in trade has been pushing another sector such as transportation, banking, financial institution, supply and distribution of goods management sector including an employee will be grown togetherness. The implication of these situation is a awakening and sustaining Indonesia’s economic growth.

Manufacture and agriculture sector must be pushed to boost national economic growth. Essentially, manufacture and agriculture sector can create and absorb many of jobs for a job seeker. An agriculture sector has judged as a basic of Indonesia’s economic sustainability factors because many of farmers and other job specialities related to an agriculture business has been created, and its sustainability depend on how our government to protect these strategic sector to boost and to spur for Indonesian prosperity.

Finally, a longlasting sustainability an agriculture business in Indonesia will be determined the future of Indonesia could be survived or vanished on the context of food security in the coming years.

Its better if Jokowi’s administration doesn’t focus just only on building infratructure itself, but protecting manufacture and agriculture sector are a national mandate which must be done by Jokowi, because manufacture and agriculture sector is a nerve and heart of Indonesia’s economic. We will see. Any comment?

*) Toni Ervianto, Senior strategic problems researcher at Strategic Assessment, Jakarta. He had earned his master at the University of Indonesia (UI).

Print Friendly, PDF & Email

Share This:



verba volant scripta manent