Islamic Finance

Indonesia GDP ’still 5.4 pct’ for 2018 despite lower IMF forecast: finance minister

| 11 February, 2018
 Yasmine Saleh
Indonesia GDP ’still 5.4 pct’ for 2018 despite lower IMF forecast: finance minister
Photo: Sri Mulyani Indrawati, Indonesia's Minister of Finance, receives the Best Minister Award from Sheikh Mohammed bin Rashid al-Maktoum, Prime Minister and Vice-President of the United Arab Emirates, and ruler of Dubai, during the World Government Summit in Dubai, United Arab Emirates February 11, 2018. REUTERS/Christopher Pike

DUBAI – Indonesia’s government will rely more on private sector investment to boost the country’s gross domestic product (GDP) growth this year that will remain at the projected 5.4 percent despite the lower forecast by the International Monetary Fund (IMF) last week, Sri Mulyani Indrawati, its finance minister told Salaam Gateway.

“The growth rate for 2018 is still 5.4 percent. We still see that the momentum of growth coming from investment[s] and export[s] will add to what is the existing consumption growth,” said Indrawati.

The IMF projected Indonesia’s 2018 GDP growth at 5.3 percent in a report released on February 6. It expects annual growth to gradually rise to about 5.6 percent over the medium term.

Indrawati said the government’s focus in 2018 is to make sure that reforms will attract more investments to create jobs.

The finance minister told Reuters on January 10 that the government has “a change of mindset” to resolve issues facing investors and small and medium enterprises in paying taxes, saying that procedures “will be easier” and “everything can be done digitally.” The government has also rolled out regulatory changes including to ease bureaucratic red-tape.

The government said last year it will keep investment growth at a pace of 8 to 12 percent for the coming few years to boost GDP growth. The economic growth of Southeast Asia’s largest economy has been inconsistent in recent years, registering 5.01 percent in 2014 and falling to 4.8 percent in 2015 before seeing two years of rises at 5.03 percent in 2016 and 5.07 percent last year.

“I think Indonesia has a very good start so we will continue to make sure that what we have already achieved will continue and if we see there is still inadequate results we will try to change in order for us to be able to respond to the change,” said Indrawati.

Infrastructure spending will be built through public private partnerships (PPP) that is creating more space for the private sector to get involved not only in financing but also in terms of equity participation so as not to burden the project itself, she added.

President Joko Widodo set ambitious infrastructure spending at 5,500 trillion rupiah ($450 billion) for his 2015-2019 term in office. Only 30 percent of this will be funded by the state budget and the rest is expected to come from the private sector.

The finance ministry expects contribution from foreign direct investment (FDI) in infrastructure to reach 800 trillion rupiah, or around $60 billion, investment from banking and capital market 1,300 trillion rupiah and capital expenditure from state-owned enterprises to reach 700 trillion.

Indrawati added that the government is going to make sure that all public spending on human capital is of a “good quality” this year. “Reform on education, labor as well as on social safety and health is going to be very important.”

Indonesia’s government budget for 2018 that was approved in October last year is aiming for 2,220.7 trillion rupiah ($163.67 billion) in spending and expects revenues of 1,894.7 trillion rupiah based on its 5.4 percent GDP projection.

(Reporting by Yasmine Saleh in Dubai; Writing by Yosi Winosa in Jakarta; Editing by Emmy Abdul Alim emmy.alim@thomsonreuters.com)

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