Economy
From The Report: Indonesia 2017
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Long considered South-east Asia’s economic powerhouse, Indonesia has seen growth decelerate in recent years as commodities prices fall and demand in China weakens, while currency depreciation in light of US monetary easing has affected its manufacturing and industrial sectors, as well as small and medium-sized enterprises. Falling global oil prices led to a removal of oil subsidies, which freed up new fiscal space in 2015. However, a concurrent decline in prices for commodities such as palm oil and minerals brought growth to a six-year low that year, with forecasts for 2016 remaining subdued in the wake of ongoing global uncertainty.

This chapter contains an interview with Sri Mulyani Indrawati, Former Managing Director, World Bank.

Articles from this Chapter

Overview

The path forward: Economic reforms should help the country maintain momentum
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Long considered South-east Asia’s economic powerhouse, Indonesia has seen growth decelerate in recent years as commodities prices fall and demand in China weakens, while currency depreciation in light of US monetary easing has impacted its manufacturing and industrial sectors, as well as small and medium-sized enterprises (SMEs). Although President Joko Widodo has launched reforms aimed at boosting both foreign direct investment (FDI) and domestic consumption, rising government spending on an…

Interview

Work in progress: OBG talks to Sri Mulyani Indrawati, Former Managing Director, World Bank
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Interview:Sri Mulyani Indrawati How can Indonesia achieve more inclusive growth? SRI MULYANI INDRAWATI: Inequality has been rising more rapidly in Indonesia than in many countries in the region, and the government has announced that reducing it is a priority. Inequality contributes to slower economic growth and can fuel social tensions. Taking action requires a better understanding of inequality. There is usually focus on inequality of incomes, but inequality of opportunity is highly relevant.…

Analysis

An accommodative strategy: New fiscal policies have boosted investor confidence
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Indonesia’s central bank, Bank Indonesia (BI), shifted its strategy in 2015, moving away from policies that had defended the floundering rupiah against further depreciation after ongoing devaluation between 2013 and 2015. In January 2016 the bank surprised stakeholders with a decision to cut interest rates, making further cuts in February and March, thereby signalling a shift toward more accommodative, pro-growth monetary policy. The business community has praised the moves, which have supported…

Analysis

Small fortunes: In light of ASEAN integration, the government has focused on strengthening the competitiveness of SMEs
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Standing as a critical pillar of the Indonesian economy, small and medium-sized enterprises (SMEs) are the country’s largest employers and a significant contributor to GDP growth, although they have been hit by Indonesia’s economic slowdown, with many struggling to access credit and export markets, in addition to feeling the pain of a commodities price drop. In light of these challenges, the government has moved to launch a comprehensive SME support strategy, including new stimulus packages…

Analysis

The big bang: The Widodo administration has rolled out a wave of stimulus packages aimed at economic liberalisation
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In a bid to support flagging economic growth, the administration of President Joko Widodo has rolled out a host of stimulus packages in recent months, offering support to critical industries, investment incentives and regulatory reforms aimed at greatly improving the ease of doing business. Arguably one of the most important of these changes was an adjustment to the list of industries closed to foreign investment, as highlighted by the country’s “negative investment list”, which was revised…

Analysis

The fruits of labour: Ongoing efforts to build up infrastructure should improve employment growth
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As Indonesia grapples with an economic slowdown, decreased export revenues and subdued GDP growth, the creation of new jobs – particularly permanent, full-time positions – is not expected to keep pace with the over 2m Indonesians who enter the labour force each year. The country’s greatest potential economic strength, its powerful domestic consumer base, could also prove to become a significant challenge, particularly since roughly half the total population is under 30 years old. In light…