A buoyant economy<\/p>\n
The economy's performance during the first six months of
\nPresident Susilo Bambang Yudhoyono's administration was fairly
\nimpressive, with gross domestic product growing by 6.65 percent
\non a yearly basis in the fourth quarter of last year and 6.35
\npercent in the first quarter of this year.<\/p>\n
As chief economics minister Aburizal Bakrie explained in a 35-
\npage booklet, Indonesian Economic Performance, issued last week,
\nthe quality of growth also significantly improved, with the prime
\nmovers now consisting mainly of investment and exports. The 5.13
\npercent economic growth last year was generated mostly by private
\nand public consumption.<\/p>\n
Investment grew by 15 percent during the first quarter of the
\nyear, supported by a 40 percent increase in capital goods
\nimports, and exports expanded by 13 percent. The Jakarta stock
\nmarket was recognized as one of the best performers in the world
\nwith its composite index gaining almost 30 percent from last
\nyear.<\/p>\n
These developments show that the process of the virtuous
\ncircle within the Indonesian economy has accelerated since the
\nfourth quarter of last year. This in turn has markedly improved
\nmarket perceptions of the country's economic outlook and strongly
\nassured investors that economic recovery is increasingly robust
\nwith stronger macroeconomic and political stability.<\/p>\n
Several new positive developments have greatly contributed to
\nthe speeding up of the virtuous circle, which began with the
\nconclusion of what the international community lauded as fair,
\nclean and peaceful legislative and presidential elections last
\nyear.<\/p>\n
First of all, the market reacted positively to the policy
\ndirection pursued by the Susilo government and to the good
\ncoordination between fiscal and monetary policies in controlling
\ninflation and defending the rupiah's stability.<\/p>\n
The government's political courage to reduce the fuel subsidy
\nby raising fuel prices by an average of 29 percent in March
\nincreased the feeling among investors and creditors that the
\ngovernment was serious about strengthening fiscal consolidation.<\/p>\n
The International Monetary Fund also praised Indonesia's
\neconomic performance after an IMF review team completed its
\nlatest assessment of the country's economy earlier this month.
\nThe IMF attributed the country's robust economic growth partly to
\nthe return of foreign investment, but warned the government that
\nif inflationary pressures was not controlled it could undermine
\nmacroeconomic stability.<\/p>\n
What made the economic report from the coordinating minister
\nfor the economy even more reassuring was the acknowledgement of
\nthe pitfalls that lie ahead. This indicates the government does
\nnot plan to relax or become complacent, which is important
\nbecause the economy is still vulnerable to internal and external
\nshocks.<\/p>\n
Persistently high global oil prices, a possible slowdown in
\nthe global economy and the upward trend in interest rates in
\nindustrialized countries are some of the external risk factors,
\nwhich are completely beyond the government's control but could
\nadversely affect the Indonesia's overall economic performance.<\/p>\n
The tighter monetary policy of the United States, for example,
\nhas prompted Bank Indonesia to raise its benchmark short-term
\ninterest rate in a bid to maintain the attractiveness of
\ninvestment in rupiah assets, thereby preventing the local unit
\nfrom wild volatility and a sharp depreciation.<\/p>\n
The government also correctly admitted it has yet to do much
\nin the way of removing high-cost factors from the economy, such
\nas endemic corruption, poor infrastructure, red tape and bad
\ngovernance in the private and public sectors.<\/p>\n
Put another way, more concerted efforts are needed to
\nstrengthen basic institutions (good governance) and to reform
\nmicroeconomic policies and supporting institutions in order to
\nreinvigorate investment.<\/p>\n
The recent disclosure of a spate of bad loans and alleged
\nlending fraud at state-controlled Bank Mandiri, Indonesia's
\nlargest bank, shows that the banking industry, which spent more
\nthan US$70 billion in taxpayer money for its recapitalization,
\nhas yet to implement operational restructuring to promote good
\ngovernance.<\/p>\n
All in all, the economic progress the country has achieved so
\nfar can serve as a building block for strengthening market
\nconfidence in the government's economic management and in the
\noverall economic outlook -- an upbeat sentiment that can help the
\neconomy weather the challenges that lie ahead.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/a-buoyant-economy-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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