IMF upgrades economic growth target
IMF upgrades economic growth target
The Jakarta Post, Jakarta
The International Monetary Fund (IMF) is upbeat on this
country's economy, saying it could expand even more than
predicted, due mostly to a favorable market response to the
peaceful general elections and the new government's policy
intentions.
Upon the completion of its visit to Indonesia, the second of
the year under the post-program monitoring (PPM) scheme, an IMF
team concluded on Friday that the economy could end up with a
fully year growth rate of 5 percent this year, greater than its
earlier projection of 4.8 percent.
"While GDP growth is still below Indonesia's potential, and
unemployment remains high, economic performance has continued to
improve in recent months and financial markets have rallied," the
IMF said in a statement.
"This improvement has come through continued sound policy
implementation and a favorable market response to the peaceful
election outcome and policy intentions announced by the new
government."
The IMF team -- led by Daniel Citrin, deputy director of IMF's
Asia and Pacific Department -- arrived here last week for a nine-
day visit to discuss various issues, notably the economic
policies with top government officials, legislators, business
leaders and others.
The visit is part of the twice-a-year regular dialogs between
the IMF and the country under the PPM system -- a program applied
to an IMF member nation after it completes a lending program. The
country completed its four-year, US$5 billion-loan package with
the IMF by the end of last year.
They added in the statement that the team was ultimately
impressed with the new government's emphasis on maintaining
macroeconomic stability, while also "moving ahead forcefully with
structural reform to improve the investment climate."
The economy, as measured by some US$208 billion of GDP, has
expanded by 5.03 percent in the third quarter year-on-year as
compared to 4.54 percent in the previous quarter, data from the
Central Statistics Agency (BPS) shows.
Despite these positive signs, the economy has been mainly
driven by consumption -- which makes up about 70 percent of GDP
-- as investment has yet to live up to expectations and lags
behind as compared to progress made by neighboring countries.
BPS said that investment grew 13 percent in the third quarter
from the same period last year.
Indonesia is in dire need of foreign investment if it is to
generate enough economic growth to absorb the arrival of new
workers, estimated at around 2.5 million each year, or even
reduce existing unemployment of some 40 million.
On Thursday, the government maintained this year's growth
target at 4.8 percent, but revised upward its prediction for next
year from 5.4 to 5.5 percent -- which would be the highest rate
over the past nine years.
Focus of discussion during IMF visit:
* Infrastructure: Stressing the importance of upgrading the
nation's infrastructure, including the power sector, roads and
transportation.
* Legal and Judicial reform: Seeking ways to increase the
effectiveness of the Corruption Eradication Commission, establish
an effective Judicial Commission and implement the blueprint on
the Commercial Court.
* Labor market flexibility: Easing and clarifying severance pay
requirements and regulations on contracting and outsourcing.