The Indonesian government has indicated a target of 5.3% economic growth in the draft state budget for 2017.
“The outlook for the global economy is expected to improve, although we have to work hard to face the uncertainty that comes from the economic slowdown being witnessed in many developing countries as well as the prospects of economic recovery of developed countries,” said President Joko Widodo in a speech on the 2017 State Budget Draft and its Financial Notes delivered at the plenary session of the House of Representatives.
The state is basing its assumptions of growth on the positive impact of the implementation of the economic policy package, particularly on prospects for sustainable infrastructure development.
“The improvement of national connectivity is projected to create efficiency in the national logistics system. As a result, it can support the stability in commodity prices,” the President stated, as reported by state-run Antara News.
The government is also looking to boost its financial market. “The government is cooperating with Bank Indonesia and Financial Services Authority to strengthen the financial sector. Financial deepening is expected to affect capital inflows in the financial market and reduce pressure on the exchange rate,” the President pointed out.
“The basic assumptions reflect the current economic conditions. The assumptions also consider the economic projections in the future,” he continued.
In a separate statement, Coordinating Minister for Economic Affairs Darmin Nasution said he is optimistic the economic growth target could be achieved by enhancing the performance of the investment sector.
“If you ask whether the 5.3 percent target is achievable, I think it is not something that is difficult to achieve,” Nasution said.
He noted that the government could count on the proposed investments actually being realized in early 2017 once the contracts for the procurement of infrastructure projects, such as highways and power plants, are signed in 2016.
“At least by November or December, or by early next year, actual investment will be made. That will be recorded as having been realized and will have an impact on economic growth,” he added.
However, Nasution also cautioned that the contribution of investment alone is insufficient, given that infrastructure development could last longer than initially estimated.
Besides investments, the government can also still rely on domestic consumption to support economic performance by ensuring that people retain their purchasing power and by keeping inflation under control, he said.
The risks to growth, he continued, are the global economic challenges because the turmoil in developed and developing countries has continued to disrupt the performance of the national trade sector.
“There seems to be an upward movement of exports and imports, but we cannot do much. We realize this as a formidable challenge before the recovery of global economic growth,” Nasution acknowledged.
But he believed the government could cope with various domestic and global challenges because it has taken anticipatory steps, such as the issuance of economic policy packages which will start yielding visible results in 2017.
Photo: CEphoto, Uwe Aranas
