Government relies on consumption for growth

In line with its forecast of improved household consumption, investment, and export performance in 2018, the government has set a 5.4 percent economic growth target, slightly higher than its 2017 target of 5.2 percent.

If the government is able to maintain household consumption and investment performance, it will be able to achieve its economic growth target of 5.4 percent in 2018. 

"As far as household consumption and an upward trend in investment could be maintained, the 5.4 percent growth target could be achieved," legislator Andreas Eddy Susetyo noted.

Susetyo of the financial Commission XI of the House of Representatives (DPR) had remarked on Wednesday that the important aspect is the improving trend that serves as a momentum for the government to set the growth target.

The legislator was referring to the economic growth target of 5.4 percent set by the government in its 2018 Draft State Budget (RAPBN 2018), which was delivered by President Joko Widodo (Jokowi) during the DPR Plenary Session at the Parliament building in Jakarta on Wednesday. 

In his speech, Jokowi said the government has optimistically set the economic growth target at 5.4 percent in the RAPBN 2018 based on increased public consumption, investment, and export/import performance.

With regard to investment, Susetyo is confident that the countrys investment climate would continue to improve, which will attract investors. Moreover, Indonesia has been awarded an investment grade rating for its bonds by Standard & Poors.

"Indonesia has gained the investment grade rating, which will further improve our investment climate in addition to the virtue of the governments deregulation measures. Thus, the ease of doing business in the country is getting better," Susetyo remarked.

Amid the global economic slowdown, the weakening of global commodity prices and geopolitical conditions, which are not yet fully conducive, Indonesias economy was able to grow at an average of five percent during the 2014-2016 period. Spurred by improving export performance and increasing investment, the growth rose further to 5.01 percent in the first semester of 2017.

Jokowi pointed out that well-maintained economic growth and improvements made in the management of the budget have continued to boost investor confidence in Indonesia.

The World Bank has included Indonesia in its Top Improvers list of ease of doing business, raising its position from 106th to 91st in its 2017 Ease of Doing Business report.

Last May, Standard & Poors had raised Indonesias state debentures status to investment grade. Earlier, Fitch and Moodys had also upgraded Indonesias investment grade outlook from stable to positive in line with the countrys macroeconomic stability and national economic resilience.

With this recognition, it is the first time that Indonesia has obtained an investment grade rating from all international credit rating agencies after the Asian financial crisis in 1997.

Hence, it is expected that investment performance with be better next year and along with household consumption and export performance will boost economic growth to reach the target of 5.4 percent. 

The president unveiled the RAPBN 2018, with a revenue of Rp1,878.4 trillion, state expenditure of Rp2,204.4 trillion, and a budget deficit of approximately Rp325.9 trillion, equivalent to 2.19 percent of the gross domestic product (GDP).

The total revenue of Rp1,878.4 trillion comprised tax revenues valued at Rp1,609.4 trillion and non-tax state revenues at Rp267.9 trillion.

"The government will take utmost efforts to achieve the revenue target by making various improvements and utilizing several national economic potentials while continuing to maintain the investment climate and business stability," the president noted.

The state expenditure is set at Rp2,204.4 trillion comprising central government expenditures amounting to Rp1,443.3 trillion and fund transfers to regions and villages reaching Rp761.1 trillion.

He remarked that the deficit in the RAPBN 2018 is smaller than its 2017 outlook of Rp362.9 trillion, or 2.67 percent of the GDP. 

To cover the deficit, the government will utilize foreign and domestic funding sources in the form of debts, which will be managed in a prudent manner.

On the occasion, the president also elaborated on the governments macroeconomic indicators in the RAPBN 2018. It has set the inflation target at 3.5 percent, exchange rate of the rupiah at Rp13.5 thousand per US dollar, interest rate of three-month treasury bills at 5.3 percent, average price of Indonesian crude at US$48 per barrel, oil lifting at 800 thousand barrels per day, and gas lifting at 1.2 million barrels of oil equivalent per day.

In 2018, development will be directed to boost economic growth in the regions of Maluku, Papua, Kalimantan, Sulawesi, Bali, and Nusa Tenggara by increasing economic links to Java and Sumatra, which have been the biggest contributors to the nations economy.

The improvement and development of infrastructure, both in terms of connectivity and energy availability, are key to realizing economic equality.

In addition, the development of border areas is a priority of the government, with the hope of them becoming the gateways for international trade transactions and boosting economy in the border areas and the country, as a whole

Source: ANTARA