Economy
From The Report: Indonesia 2018
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Macroeconomic growth gained momentum in 2017 on the back of improved global commodities prices, increased foreign direct investment and robust domestic consumption. Although the country has not yet returned to the near-6% average annual GDP growth recorded in the five years leading up to 2012, its macroeconomic fundamentals remain robust, with an improved current account balance and a sweeping tax amnesty programme supporting a recent sovereign credit rating upgrade. New sovereign and corporate bond issuance will help fund Indonesia’s substantial infrastructure agenda over the medium term, providing a critical finance channel for infrastructure development stakeholders.

This chapter contains interviews with Jim Yong Kim, President, World Bank Group; and Hiroshige Seko, Minister of Economy, Trade and Industry of Japan.

Articles from this Chapter

Overview

Development condition: Investment, planning and improved ease of doing business to underpin continuing upward trajectory
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Macroeconomic growth gained momentum in 2017 on the back of improved global commodities prices, increased foreign direct investment (FDI) and robust domestic consumption. Although the country has not yet returned to the near-6% average annual GDP growth recorded in the five years leading up to 2012, its macroeconomic fundamentals remain robust, with an improved current account balance and a sweeping tax amnesty programme supporting a recent sovereign credit rating upgrade. New sovereign and…

Analysis

Mind the gap: Improved fiscal management and oil prices are working in harmony to improve the bottom line
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Authorities have considerably reduced the current account deficit, which fell to historic lows in 2016. Improved fiscal management led to global ratings agency Standard & Poor’s upgrading Indonesia’s sovereign credit rating in May 2017, which should encourage greater capital inflows. Meanwhile, a gradual rise in commodities prices will help balance the books. These higher prices have not extended to the oil and gas sector, further bolstering the outlook. Crude oil price increases…

Interview

Forward together: Jim Yong Kim, President, World Bank Group, on creating and supporting inclusive growth in the country
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Interview:Jim Yong Kim What measures and policies can further support Indonesian GDP growth in the coming years? JIM YONG KIM: Investment in both people and infrastructure is critical for accelerated, sustained growth. To build human capital the focus needs to be on preparing tomorrow’s workforce to be as competitive as possible. Indonesia must invest in children, by focusing on priority interventions to address childhood malnutrition, expanding access to early-childhood education and improving…

Analysis

Taxing questions: Amnesty programme to trigger step change in tax compliance
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After long-term struggles to meet tax collection targets, the government rolled out a bold tax amnesty initiative in 2016. The programme – eliminating criminal prosecution and large back tax bills, and offering lower tax rates on hidden assets – has been successful, as trillions of rupiahs of onshore and offshore assets and income have been declared in the amnesty period. However, repatriating these assets has proven challenging, and the Ministry of Finance (MoF) is working to improve…

Interview

A backing force: Hiroshige Seko, Minister of Economy, Trade and Industry of Japan, on strengthening ties and infrastructure support
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Interview:Hiroshige Seko How can Japan and Indonesia strengthen their bilateral trade in the future? HIROSHIGE SEKO: To develop bilateral trade between Japan and Indonesia, it is important for Indonesia to both enhance the competitiveness of its export industries and promote industries equipped to meet domestic demand. I believe that strengthening the value chain will be key to enhancing the competitiveness of Indonesia’s export industries. I see great growth opportunities for these industries,…

Analysis

Policies of green: Changes in government regulation come in response to a challenging commodities environment
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Commodities exports are an important part of the Indonesian economy, and the country has been negatively affected by a slump in global prices, with export receipts contracting significantly since 2012. Although much of this is due to weakening demand in China, Europe and the US, the recent introduction of several protectionist policies – including restrictions on raw iron ore, nickel and copper concentrate exports – has also played a role. While these policies will help boost value-added…

Analysis

Accounting on change: Businesses and the government are turning to bond sales to fund infrastructure investment
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The government is increasingly tapping international bond markets as it advances a substantial infrastructure agenda. The country issued Asia’s largest sovereign bond in 2016, pushing total annual bond issuance above the $10bn threshold, while state-owned enterprises (SOEs) have increasingly sought bond financing for major infrastructure projects such as port upgrades and a planned light rapid transit (LRT) system in Jakarta. Bond issuance in foreign currency is also becoming increasingly…