Coordinating Minister of
economy Chaerul Tanjung stated that Indonesia’s economic growth by end of 2014
was most realistic at around 5.2% - 5.5%. Chaerul stated that global economy
was still consolidating as developing countries including Indonesia were having
economic slowdown.
Still, the government would strive to propel economic
growth to a higher level accumulatively at Q I this year by 5.17% by promoting
export performance and direct investment.
Naturally, household consumption which was not up to the
maximum in Q II due to fasting month and Idul Fitri, would increase in Q III
after restrictions in Q II; this was inclusive of 13th month salary paid
in Q III.
BPS noted that Indonesia’s economy by Q II 2014 only grew
by 5.12% y o y. accumulatively, Indonesia’s economic growth in QI-2013. The
Government in APBNP 2014 assumption of economic growth of 5.5%, a downturn
against previous assumption at 6%.
The process was growth below 6% for 5 quarters
consecutively; and yet by economist assumption, 6% was minimum figure so
economy could keep up with growth of labor force. Indonesia’s economic growth
was beginning to be eroded since Q II last year as demand for Indonesia
commodity in China, one the biggest buyer countries, dropped drastically.
To economic slowdown in Q I, there were allegations that
it was on account of tight monetary policy executed by BI. Some monetary
policies were put in effect, such as BI rate at 7.5% for months, restriction of
Loan to Deposit Ratio [LDR] at national banks which may not exceed 92%, Loan to
Value Consumer especially for KPR mortgage and the minimum Mandatory Giro [LDR]
amounting to 8%.
The tight Monetary Policy seemed to be effective in
controlling inflation. Evidently in Q I inflation was still around 2,9% toward
the expected 4.5% + 1%.
However the effort to improve ratio of current
transaction to GDP at 2.0% was not easy to attain since national fundamental economy
was not condusive to it.
So the urgent thing was to improve national economic
structure through structural reformation. This was exactly as recommended by
the World Bank that to propel economy, Indonesia must reform the fundamental.
Certainly BI could not work alone to do the task because it was in the domain
of the Government.
It was advisable for the Government to pay attention to
IMF who predicted that the growth level of Asian countries including Indonesia
was predictably not more that 5% and in the next 5 years it was important for
Indonesia to on the alert of global outburst.
Beside the external influencing factors, Indonesia was
also struggling with internal problem like dependence on imported commodities
and export of raw materials without added value [like iron ores]. What’s more,
the heavy flow of import was not balanced by sizable export.
Still there was budget for energy subsidy without proper
objective, growth concept without equal distribution which widened gap, all
portrayed the present Indonesia’s economic structure. It was just like building
a house on fragile foundation.
Just a little ripple in the ocean of global market could
make Indonesia shake. The economic performance was negatively affected.
Evidently Indonesia’s economy was kept hostage by serious problems, i.e. four
deficits, i.e. deficit in trade balance, deficit in current transaction,
deficit in trade balance of payment and deficit in primary balance of APBN
State Budget
The four deficits had it effect on weakening of Rupiah
value against some world’s leaing currencies especially USD which jacked up
bank interest and halted economic growth. Meaning Indonesia’s economy in the
past decade did not bring significant result although the average national
economic growth was posted at 5.9%.
To consider her abundant natural resources, supposedly
Indonesia could elevate economic development to 7% or more. Accordingly as
economic growth was low the number of poor people in this country was still
high, i.e. 28 million people or 11.2% of total population.
If the marginal group were added to that, the population
of poor people in Indonesia broke through 100 million. By eased criteria open
employment in Indonesia was7.2 million or 5.7% of total productive generation.
Those who worked for only 8 hours a week were not categorized as jobless.
Even the working group were problem entangled. Around 71
million or 60% of people who worked were informal workers. They generally did
not have enough skill and income, they were mostly vulnerable to economic
turbulences.
Even the relatively low economic growth was rated as
exclusive or being benefited by few people, i.e. those who had access to
financial resources or working in capital or technology intensive business or
rich natural resources. Most of the people working in the agricultural and
trading sectors remained poor. The condition was reflected in Gini Coefficient
which came to 0.42 in 2013, higher than that of 2004 at 0.37.
Therefore it was time for Indonesia to change its
economic paradigm. It became imperative to build the industry sector, i.e. the
Sectors of natural resources processing, electronics, automotive, capital goods
and basic industry. Deficit in trade balance since 2012 was due to increased
import of capital goods, machinery components sparepart and auxiliary goods or
the manufacturing industry, which could be solved by building supporting infra
structure industry at home. To anticipate growing domestic consumption it was
necessary to increase local production capacity. The Government’s role was to
draw the roadmap, regulate and give directions.
On the financing side, BI was expected to have the
intention and will power to ease the monetary policy to induce incentive to
economic growth process. Unfortunately by end of this year the hope was not
easy to realize.
As known, BI persisted to adopt the policy of controlling
inflation and narrowing deficit. Meaning although Indonesia’s economic
expansion since Q II 2014 was posted as lowest since 2009, monetary easing
policy could not be expected for the near future.
BI still believed that Indonesia’s economic slowdown
process was still in parallel with BI’s effort to control inflation and
deficit. It clearly means that BI would not relax tight money policy for the
near future although economic growth record in Q II this year was at the lowest
in the past 5 years.
As known, from June to December 2013 last BI had
increased bank interest from 1.75% toward 7.5% and introduced various austerity
steps in line with inflation and widening deficit, which triggered capital
outflow.
Government officials and BI had repeatedly underscored
that lowered growth percentage was part of the masterplan to stabilize economy.
This was in line with their proclaimed jargon, “stability over growth”
Looks like Indonesia had to wait for the next government
to assume office to realize relaxation of economic policy, especially on the
monetary side to propel economic growth which was more dynamic, inclusive and
sustainable. (SS)
Business New - August 13, 2014
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