Jakarta, Dec 8 (Antara) - This year's global economic uncertainties are expected to continue in 2017 and to affect the Indonesian economy, yet analysts have said Indonesia's economy is relatively strong in facing global challenges next year.
According to Finance Minister Sri Mulyani Indrawati on Wednesday, global conditions greatly affected Indonesia's economy this year, and the trend will continue in 2017. Therefore, in setting its economic assumptions for 2017, the government has adopted moderate steps.
In assuming its economic growth next year, the government has set itself a target of 5.1 percent, relatively lower than the rates estimated by many other institutions. However, Minister Mulyani argues that the 5.1 percent figure does not reflect any pessimism but optimism combined with prudence.
Several institutions have predicted higher growth. The World Bank, for example, has predicted Indonesia's economic growth at 5.3 percent for next year. Other institutions such as the Asian Development Bank (ADB), the Bloomberg Consensus Forecast, S&P, Fitch, and Moody's have set their predictions at 5.1 percent, 5.3 percent, 5.2 percent, 5.5 percent, and 5.2 percent, respectively.
Sri Mulyani claimed the State Budget 2017 (APBN 2017), which was endorsed by the House of Representatives at the end of last October, was drafted when the country was still facing strongly 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 this year, the government has been forced to adjust the distribution of its 2016 revised state budget. This is the government's step toward improving the country's fiscal structure by slashing the budget in proportion with state revenue.
"The government made the change to maintain the credibility of the fiscal instruments by strengthening Indonesia's 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 is paramount for maintaining the momentum, but the prudent aspect should continue to be observed. We must be ready to face global uncertainties that should be viewed as an opportunity to serve the interests of the state."
The government's prediction of 5.1 percent growth reflects a balance between optimism and pragmatic understanding. "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 Mulayani said while addressing a seminar on Indonesia's Economic Outlook 2017 in Jakarta last month.
According to academician Wahyoe Soedarmono, who is also the chairman of the study management program of the University of Indonesia, Indonesia's economy is strong enough to face the challenges to the global economy that are likely to emanate from Donald Trump's policies.
"I do not see any reason to be concerned because our consumption still accounts for 56 percent of our total output," he stated in Jakarta on Monday (Dec 5).
He made the remark after attending an expose on Indonesia's economy 2017 titled, "Waiting for the Daybreak in the New Global Economic Equilibrium," organized by Sampoerna.
"In general, Indonesia's 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 at the end of 2016 and the whole of 2017. There are a number of policy choices available, such as an expenditure-switching policy and increasing Bank Indonesia's reference rates.
In the third quarter of 2016, Indonesia's current account deficit of 1.8 percent of the gross domestic product (GDP) was seen as adequate. This could minimize the negative sentiment against Indonesia's economy and result in lower capital outflows.
The capital outflow in mid-November, or when Donald Trump was elected president, reached Rp16 trillion. Yet, the effect of the capital outflow is far smaller for Indonesia compared with that of Thailand, India, Taiwan, or South Korea, Wahyoe said.
Pressures in Indonesia that could cause the depreciation of the rupiah could be reduced through an increase in state revenue from the tax amnesty program. The assets declared under the program have reached a redemption value of Rp98.7 trillion, and repatriation funds are worth Rp143 trillion. The funds will be entering Indonesia until the end of 2016.
In the meantime, the International Monetary Fund (IMF) has predicted that the Indonesian economy will grow at 5.1 percent next year, mostly fueled by high consumption and private investment. "The growth will follow a recovery in commodity prices, and a lower lending rate in 2017," IMF Executive Council member Luis E Breuer said in a press statement released last month (Nov 25).
The IMF also predicted that Indonesia's economy will expand by 5 percent this year, propelled by high private consumption. The country's inflation rate in 2016 is projected to reach 3.3 percent year-on-year and increase to the mid-range of 3-5 percent in 2017 due to the revised electricity subsidy target, he added.
The current account deficit is projected to increase from 2 percent of the GDP in 2016 to 2.3 percent next year due to an increase in fixed investments and imports.
The IMF praised the stable economic conditions in Indonesia as of November-end 2016, driven by a mixture of proper and prudent macroeconomic policies and structural economic reforms.
"The authority (in Indonesia) is capable of directing its economy to steer it through the various dynamics of the global economy," he stressed.
The way in which the government has expanded state revenue sources to spur economic growth has helped induce a sense of stability as it has managed to prevent the deficit from exceeding 3 percent of the GDP, the IMF noted.***3***(A014/INE )
EDITED BY INE(T.A014/A/BESSR/F. Assegaf) 08-12-2016 12:31:3 |
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