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The government is committed to keep the business climate and investment in Indonesia conducive to attract investors and positively impact the growth of the domestic economy. Finance Minister Sri Mulyani said it was responding to the International Monetary Fund (IMF) predicting that Indonesia’s economic growth would reach 5.3 percent by 2018.

Anyway, let’s see what factors make a prediction about 5.2 percent, what is the consumption factor, I think the IMF assumes consumption of five percent, the big challenge is to maintain the momentum of investment and export so that it is as strong as Q3 We will strive to keep it in accordance with Presidential instructions to keep the business climate and investment, “said Sri Mulyani when met at the Ministry of Finance, Jakarta, Wednesday (15/11).

Photo Courtesy IMFC.

Photo Courtesy IMFC.

Previously, the IMF estimates economic growth in Indonesia to reach 5.3 percent in 2018 due to increased contribution of exports and investment. IMF’s Mission Chief for Indonesia Luis E Breur said domestic demand will also increase in line with the growth of bank credit.

However, the increasing domestic demand is still at a moderate pace. “The Indonesian economy continues to run well, supported by prudent macroeconomic policies, increased global economic growth and commodity prices, and ongoing efforts to strengthen competitiveness,” Breur said.

In the conclusion of the discussion for “2017 Article IV Consultation“, the IMF estimates Indonesia’s economic growth will continue to grow to 5.3 percent in 2018 after growing 5.1 percent in 2017.

Photo Courtesy IMFC.

Photo Courtesy IMFC.

Breur said Indonesia’s economic well-being is also characterized by a steady inflation rate. This year, inflation is estimated at 3.7 percent (year on year / yoy) and declining to 3.6 percent in 2018.

Indonesia’s current transactions are estimated to still suffer a deficit of 1.7 percent of Gross Domestic Product (GDP) and swell to 1.9 percent of GDP by 2018. However, the IMF emphasizes that there is a tendency for greater external economic risk due to potential reversals of foreign capital flows, economic growth which is slower in China, and the security risks of the geopolitical stability of the region.

Chart Courtesy IMFC.

Chart Courtesy IMFC.

From the domestic economy, the risk is still looming due to the potential shortage of tax revenues and the tendency of interest rate hikes in financial markets given the tightening liquidity of global financial markets. “On the upside, global growth and commodity prices could be stronger than expected,” Breur said.

The IMF concludes that Indonesia’s policy in the short term should balance its economic orientation to boost growth, while at the same time maintaining economic stability. For monetary policy, the IMF advises authorities to maintain price stability while supporting the rate of economic growth.

The monetary policy applied by Bank Indonesia (BI) currently assessed by the IMF is appropriate. In the Indonesian financial system, the IMF considers that policies must maintain stability.

The IMF sees there is an urgent need to implement a medium-term revenue strategy that focuses on tax policy reform and tax administration to support the strengthening of the business climate. [1]


Sri Mulyani: SMEs Rescuer During Crisis

The 12th World Islamic Economic Forum (WIEF) focuses on the role of Micro Small and Medium Enterprises (SMEs /UMKM in Indonesia) in promoting sustainable national economic growth, including Islamic economics.

SMEs are considered to have contributed greatly especially in job creation and saving a country from economic storms.

Minister of Finance Sri Mulyani while attending the World Islamic Economic Forum, admitted that UMKM has been playing a role in stimulating economic growth in the future.

Through the 12th WIEF, Sri said there are three steps to boost the contribution of MSMEs in the future.

First, it stresses the importance of cooperation between government and the private sector. We give high hopes to the cooperation of state leaders, policy makers to be together with UMKM and start-up entrepreneurs, “said Sri Finance Minister at JCC, Jakarta.

Sri Mulyani hopes that the decentralization of economic growth can provide an opportunity for MSMEs as an economic driver. That way, in the event of WIEF Mocca Fest session, UMKM and start up actors get chance or stage to show off and meet with investors.

SMEs become anchoring during economic shocks and absorb labor,” said former Executive Director of this World Bank.

The second effort, added Sri Mulyani, government and private sector need to support technological innovation as it is rife in Indonesia. Third, policies for MSMEs and start-ups are implemented in the field so that they are beneficial to MSMEs.

Give UMKM and start-up opportunities to meet and negotiate business, and share experiences so that they contribute to the real economy,” he said.

On the same occasion, Chairman of the WIEF Foundation Tun Musa Hitam said there are about 60 million MSMEs in Indonesia which has been the backbone of the national economy. “The contribution of SMEs to the absorption of labor and Gross Domestic Product (GDP),” he explained. [2]


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References Sources:

[1] Taken from Sri Mulyani Sebut Dua Tantangan Terbesar Ekonomi Indonesia written by Nidia Zuraya for Republika Online.

[2] Taken from Sri Mulyani: UMKM Penyelamat Saat Krisis written by Fiki Ariyanti for Liputan6.

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