Indonesian government eyes a higher economic growth in 2020 compared to this year. At plenary cabinet session led by President Joko Widodo, government assumed that Indonesia’ economy will grow in a range of 5.3 to 5.5 percent, higher than the 2019’ target at 5.3 percent.
According to National Development Planning Minister Bambang Brodjonegoro, government desires a higher growth, but there are several medium-term issues need to be fixed. One of the biggest challenges is manufacture sector revitalization supported by high-quality human resources, he said.
Besides, government will continue to focus on infrastructure, especially clean water and electricity. Based on the agency data, infrastructure contribution to Gross Domestic Product(GDP) is considered low at 43 percent, while other countries can be at 70 percent.
Moreover, Indonesia Finance Minister Sri Mulyani Indrawati added, government will put attention on maintaining a more balance economy structure and slashing current account deficit. She said that the meeting also discussed about how to upgrade Indonesia from middle income to upper income country. She expects that it will be detailed in another meeting.
President Widodo explained that there are four things that will be focused on ahead of 2020. He wants that the macroeconomy and fiscal policy working plan sustainably continues, even though Indonesia’ entering election year.
He said, the government will continue prioritizing human resources. Moreover, he hopes that the 2020’ working plan can anticipate the world’ economy dynamics. And the least, Indonesia’s positive economic growth moment must be maintained.
Vincent Conti, the Economist of Asia Pacific S&P Global, said there are several supporting factors that influence economic growth in 2019, which is increasing of government spending, public spending and demographic bonuses.
However, there are several factors that could hinder the economic growth in 2019, such as the removal of price controls, tight monetary policy and uncertainty over economic conditions after the presidential election.
“The government will also pay attention to the current account deficit and pressure on the currency market next year,” Conti said
“Some challenges for Indonesia such as falling oil prices could have a negative impact on other terms of trade, the global influence of trade disputes is getting worse, financial market pressures that have been felt by developing countries,” Frederico Gil Sanders World Bank‘s Lead Country Economist for Indonesia told reporters.
Stronger domestic demand, still led by investment, is expected to outweigh the drag from the external sector, amid slower global growth and continued global trade policy uncertainty, he said.
Investment growth remained a key driver of the economy, with construction investments rebounding from the previous quarter. While private consumption eased slightly, a surge in government consumption kept total consumption growth on an even keel, said Sanders.
Rodrigo A. Chaves, World Bank Country Director for Indonesia and Timor-Leste added, with monetary, fiscal policies securing macroeconomic stability, and structural reforms that reduce domestic vulnerabilities, will further enhance economic resilience and allow for even better management of global volatility, should it return in the future.
Going forward, external conditions are likely to continue to pose substantial risks to Indonesia’s growth outlook. The persistence of uncertainty regarding global trade tensions and the possibility of further tightening of United States monetary policy may lead to further capital outflows and financial volatility among emerging market economies, including Indonesia.
“Although pressures on the Rupiah have eased, Indonesia should further strengthen its external position by accelerating efforts to increase exports and investment,” added by Sander.
He continued, measures such as implementing free trade agreements and revising the negative investment list to reduce restrictions to investment from abroad will boost Indonesian competitiveness and create good jobs that can move more Indonesians into the middle class.”