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Sunday, December 10, 2017

DBS Predicted Indonesia's Economy in 2018 is Growing Faster Than 2017

Indonesia is one of the countries with the strongest economic fundamentals in the Asia region. Various indicators show a good performance, such as the ratio of government debt which is below 30% of GDP, one of the lowest among developing countries.

With a Government that is stable and relatively low political risk, Indonesia's economic potential to move more quickly in the next few years. External factors being the main economic growth of Indonesia towing, especially those from the rise in commodity prices.

"We estimate that Indonesia's economic growth will rise 5.3% and 5.4% in 2018 and 2019," said DBS Group Research Economist Gundy Cahyadi 'Indonesia in 2018/19: Higher gear?' which was released November 20, 2017.

The challenge is how the Government can accumulate a variety of indicators to spur economic growth faster. Like, encourage private investment that since 2013 percentage decline. The Government's efforts through infrastructure development seems to have reaped results. This is visible from the investment growth which reached 7.1% in quarter III-2017, the highest since the quarter I-2013. The investment is estimated to account for 35% towards GDP 2017 growth.

Private investment in the count because of the limited government fiscal space The Constitution governs the restriction of a maximum budget deficit of 3% of GDP. It is estimated the deficit will reach 2.6% by 2018, higher than the Government's estimate of 2.2%. DBS Group Research predicted a rise in the deficit driven mainly by a decline in potential tax revenue, rather than budget increases.

However, the trend of rising world crude oil prices will boost the country's revenue from the oil and gas sector. In the calculation of the DBS Group Research, any rise in oil prices by 10% will give you an extra budget of Rp 6.7 trillion in state budget.

Unlike most other countries, Indonesia is one of the countries that do not take advantage of the growing global demand for manufactured products. Indonesia's exports still rely on the commodity sector, particularly coal which grew 49 percent, crude palm oil amounted to 44%, and oil and gas amounted to 21%. While exports of manufactured products only grew 2.5%.

The Government has committed to reduce the dependence of commodity products. This is done by publishing the 16 Policy Reform Package in the last two years. Proven, Indonesia's ranking in the Ease of Doing Business were released World Bank soared from 106 ranking in 2016 be 72 in 2017.

Foreign direct investment into the manufacturing sectors listed record highs of US$16.6 billion in 2016. Investors no longer makes the mining sector as an investment destination, but rather the sector of machinery and electronics.

The pressure of inflation, estimated to be likely to be stable mainly caused the price of groceries. This as the Government repair distribution lines so price disparity interregional decreases. As for the biggest inflation risk comes from the increase in the price of crude oil, especially in the transport sector and electricity accounted about 25% of the consumer price index.

Wide range of indicators is expected to encourage the consumption of households. The issue, improving commodity sector that occurred the last time does not directly impact people's income. The ability to buy, especially in the community of the low income class, is still low.

As seen from the consumption of non-staple goods or discretionary goods the community dropped to 4.5%, well below the conditions three years ago amounted to 6%.

"Indonesia's economic growth will be higher if the growth in consumption discretionary goods community higher," said Gundy.
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