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The World Bank together with the Paramadina Public Policy Institute held a launching event for the World Bank’s Indonesia Economic Quarterly (IEQ) Report March edition on 18th March 2013 at the Paramadina Graduate School, Jakarta. The report showed that Indonesia’s economic growth was expected to remain steady in 2013; however, mounting domestic economic and policy pressures leave no room for complacency.
“Economic resilience has been Indonesia’s strength despite a weaker global economy,” said Stefan Koeberle, World Bank Country Director for Indonesia. “With the right policies in place, Indonesia could move growth higher, harnessing the forces of urbanization and rising incomes, while providing quality jobs for a growing labour force.”
Indonesia’s GDP growth decreased to 6.2% in 2012 from 6.5% in 2011. Indonesia recorded a strong growth in the fourth quarter in 2012, but the growth in investment is declining and net exports remain a burden on growth.
Growth in capital imports declined by 12.1% year-on-year in January 2013. The fall in capital goods imports was partly due to the weakness in commodity prices, which has led to lower investment in mining and oil sectors.
The report also highlighted recent inflation trends, which might weaken domestic consumption, which account for around 60% of the nation’s economic growth.
In launching the IEQ, the World Bank highlighted five emerging sources of pressure on the economic outlook, namely the cooling in investment growth; the possible implications of moderating measured real sales and nominal GDP growth; trends in the external balances; the continuing burden of energy subsidies and the slowing pace of poverty reduction.
The biggest risk to near-term growth may come from domestic investment, which drove two-fifths of the growth seen in 2012. Investment spending has slowed, particularly in capital-intensive resource sectors. Fixed investment growth declined to 7.3% year-on-year in the fourth quarter of 2012, down from 12.5% in the second and imports of capital goods have weakened. The investment climate would benefit from improved certainty in the regulatory environment.
Appropriate policy responses to mounting pressures could also include increasing public infrastructure investment and focusing on trade competitiveness, as well as fuel subsidy reform.
“As pressures mount, global experience suggests that proactive policy responses help keep economies on track and avoid the growth hiccups that often characterize middle income countries. Recent developments warrant a particular focus on trade competitiveness and supporting private investment,” says Jim Brumby, World Bank Lead Economist and Manager for the Poverty Reduction and Economic Management sector in Indonesia.
KADIN Indonesia - 2013
Capital: Jakarta
Population: 259 million (2016)
Currency: Indonesian Rupiah
Nominal GDP: $936 billion USD (IMF, 2016)
GDP Per Capita: $3,620 USD at Current Prices (IMF, 2016)
GDP Growth: 5.0% (2016)
External Debt: 36.80% of GDP (BI, Q2 2016)
Ease of Doing Business: 91/190 (WB, 2017)
Corruption Index: 90/176 (TI, 2016)
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