Monday, 24 September 2018 12:51

Indonesia's Economic Fundamentals Are Still Strong

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The World Bank considers Indonesia's economic projections to remain positive despite increasing global uncertainty. This happened because stronger private and government consumption was able to lift real gross domestic product growth –GDP to 5.3 percent in the second quarter of this year. World Bank Country Director for Indonesia and Timor-Leste, Rodrigo A. Chaves in the September 2018 edition of the World Bank's Indonesia Economic Quarterly said in Jakarta on Thursday (20/9) that it was also seen from the commitment of the Indonesian government to maintain stability by issuing strict and coordinated policy. He emphasized that strong macroeconomic fundamentals have increased Indonesia's resilience amid rising global uncertainty. According to Rodrigo, Indonesia's economic growth is expected to reach 5.2 percent this year and also in 2019, which is supported by solid investment, stable inflation, and a strong labor market. Then, it will gradually strengthen up to 5.3 percent by 2020. Rodrigo further explained, Indonesia has reduced poverty rates from 19.1% in 2000 to 9.8% in 2018. This is a good opportunity for economic growth, especially in urban areas. The World Bank said, better economic opportunities, especially in urban areas, have helped many residents get out of poverty and become part of the middle class. More than half of Indonesia's population now lives in urban areas. Meanwhile, World Bank Chief Economist in Indonesia, Frederico Gil Sander remarked that urbanization could be a major force for economic growth and poverty reduction. But if it is not managed properly, losses due to the pressure will be greater than the benefits. On one hand, to generate the potential for urbanization, the central and regional governments need to cooperate to carry out policy and institutional reforms. On the other hand, the World Bank's positive assessment of Indonesia's economic growth also triggered a strengthening of the rupiah exchange rate against the US dollar by 22 points to 14,823 rupiahs on interbank transactions in Jakarta on last Friday (21st/9). CSA Research Institute senior analyst, Reza Priyambada said in Jakarta on Friday that a positive assessment from the World Bank which estimates Indonesia's economic growth at 5.2 percent also contributed to the sentiment for strengthening the rupiah. Reza added that the World Bank considered that stronger domestic demand in Indonesia would continue to be a driver of economic growth.

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