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More reforms needed, but will Jokowi take the risk?
To boost investment, the economy should be made more open in its trade and investment. But this would pose a dilemma for Jokowi.
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President Joko "Jokowi" Widodo speaks to journalists on the sidelines of the inauguration of three geothermal power plant (PLTP) infrastructure projects worth Rp 6.18 trillion (US$532.07 million) belonging to state oil and gas firm Pertamina in Manado, North Sulawesi, on Dec. 27. (JP/Lita Aruperes)
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ith President Joko “Jokowi” Widodo having entered the second half of his term, it seems it could be difficult for him to achieve the desired objectives of his economic agenda by the end of his term in 2019.
Then, economic growth would be hovering at around 5 percent, and given current conditions, there is no way it could expand to 7 percent in 2019, as he set in his Nawacita (nine goals) campaign platform.
Investment growth remains weak. Foreign direct investment totaled only US$2.5 billion in the first quarter of 2017, less than half of the figure recorded in the third quarter of 2016.
The construction of many infrastructure projects has moved slowly, been delayed or is being reviewed. Electricity generation may fall short of the additional 35,000 MW target. With a lack of interest from private investors, a shortage of funding would bedevil Jokowi’s signature programs in infrastructure development.
The tax revenue target has to be lowered and the budget deficit is creeping upward, nearing the legal threshold of 3 percent. Although the outcome of the tax amnesty was better than that in other countries, it failed to meet the government’s target.
Although Bank Indonesia has kept monetary policies accommodative, bank lending growth has been weak since December 2015.
In the energy sector, oil production has fallen and the oil and gas deficit in the balance of payment has climbed. The deficit reached $4 billion in the first half of 2017, double the figure in the same period last year.
