Indonesia`s economic growth to increase in 2017

Many have predicted that while the global economic environment will remain uncertain in 2017 Indonesias economic growth next year will be higher than in 2016.

In 2016, national economic growth was initially set at 5.3 percent and later revised downward to 5.1 percent due to the economic downturn. By contrast, the target for 2017 has been set at 5.1 percent yet growth could reach 5.3 percent.

The National Development Planning Agency (Bappenas) has predicted that Indonesias economy will grow by 5.3 percent in 2017.

"Yes, for economic growth in 2017, I have predicted a range of 5.1 to 5.3 percent," Minister of National Development Planning and Head of Bappenas Bambang Permadi Soemantri Brodjonegoro said during a discussion on the "2016 Year-End Final Evaluation and Outlook 2017" in the Bappenas office here on Saturday (Dec. 31, 2016).

Several institutions have forecast higher growth. The World Bank, for example, has predicted that Indonesias economy will grow by 5.3 percent next year, while the Asian Development Bank, the Bloomberg Consensus Forecast, S&P, Fitch, and Moodys have estimated growth at 5.1 percent, 5.3 percent, 5.2 percent, 5.5 percent, and 5.2 percent, respectively.

According to Bambang, his estimate is based on the assumption that the economy will still be dominated by consumption, particularly as the impact of the global economic turmoil on the domestic economy is as yet uncertain.

"We cannot yet predict the impact of the global economic turmoil. After all, the global economy is not bright," said Bambang. Notwithstanding subdued global growth, Indonesia was able to grow by 5.1 percent in 2016, indicating that it was in a position to weather global economic upheavals.

The global economic uncertainty is expected to linger in 2017 and affect Indonesias economy, yet analysts say it is in a relatively stronger position to face global challenges this year. However, measures to ensure that the national economy adapts to global change are important to lift growth.

In setting its economic assumptions for 2017, the government has adopted moderate steps, Finance Minister Sri Mulyani Indrawati said, keeping in mind the likely global economic scenario next year.

The government has set a target of 5.1 percent, relatively lower than estimates by many other institutions. However, Mulyani argues that the 5.1 percent figure does not reflect any pessimism but optimism combined with prudence.

Sri Mulyani claimed that the State Budget 2017 (APBN 2017), which was endorsed by the House of Representatives in October, was drafted when the country was still facing challenging internal and external conditions.

"These conditions included the United States economic conditions, the election of Donald Trump as the US president, the monetary policies of advanced states, and the economic condition of China," she stated.

In response to the internal and external conditions in 2016, the government was forced to make expenditure cuts in its 2016 revised state budget. To improve the countrys fiscal health, the government slashed the budget in proportion with state revenue.

"The government made the change to maintain the credibility of the fiscal instruments by strengthening Indonesias economic foundation. It was done to protect the economy from being shaken by (economic) turmoil," she asserted.

The APBN 2017 was drafted from a prudent and optimistic perspective. "This was paramount for maintaining momentum, but it was also necessary to be prudent. We must be ready to face global uncertainties that should be viewed as an opportunity to serve the interests of the state."

The governments prediction of 5.1 percent growth reflects a balance between optimism and pragmatism. "There is optimism because we are convinced we will be able to maintain the momentum. We balanced it with some prudence because there are external or even internal challenges that we will have to face," Minister Mulyani said while addressing a seminar on Indonesias Economic Outlook 2017 in Jakarta recently.

According to academician Wahyoe Soedarmono, who is also the chairman of the study management program of the University of Indonesia, the countrys economy is strong enough to face challenges to the global economy that are likely to emanate from Donald Trumps policies.

"I do not see any reason to be concerned because our consumption still accounts for 56 percent of total output," he stated in Jakarta on Monday (Dec 5).

He made the remark after attending an expose on Indonesias economy 2017 titled, "Waiting for the Daybreak in the New Global Economic Equilibrium," organized by Sampoerna.

"In general, Indonesias position is relatively strong, and it is ready to face the short-term market turmoil, at least until the end of 2017," he noted.

However, Indonesia should watch the planned increase in the benchmark rate by the United States Federal Reserve in 2017. There are a number of policy choices available, such as an expenditure-switching policy and increasing Bank Indonesias reference rates

Source: ANTARA