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RI economy still facing challenges, WB says
World Bank (WB) lead economist Jim Brumby predicts that the Indonesian economy will still face a number of challenges related to the countryâs uncertain investment levels and declining export sector, which have caused its economic growth to slow to 5
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orld Bank (WB) lead economist Jim Brumby predicts that the Indonesian economy will still face a number of challenges related to the country's uncertain investment levels and declining export sector, which have caused its economic growth to slow to 5.3 percent this year.
'Global growth has shown positive signs; however, Indonesia is facing a number of challenges, including terms of trade which remain unchanged, higher interest rates and policy uncertainties,' he said in a press conference in Jakarta on Tuesday, as quoted by Antara.
Brumby further explained that the latest challenge Indonesia was currently dealing with was related to a ban on raw mineral exports which had increased uncertainties among long-term investors and put more burdens on the state budget (APBN).
The WB predicted that the ban would have a negative impact of US$12.5 billion on net trade and $6.5 billion worth of losses in fiscal revenues from royalties and export and income taxes for the next three years.
Therefore, implementing policy reforms and reducing policy uncertainties are among efforts the government needs to carry out to support economic growth, which had reached 5.7 percent in 2013.
'Concerning risks of a sustainable economy and Indonesia's development agenda which is ambitious, reducing uncertainty in policies and reform follow-ups should be prioritized,' Brumby said.
He said one reform the government could carry out was adjusting fuel prices to reduce the burden of energy subsidies which were predicted to increase by more than had been allocated for in the 2014 APBN.
The WB has predicted that the subsidy expenditure will increase to around 2.6 percent of gross domestic product (GDP), up from 2.2 percent of the GDP in 2013, unless there is a future-oriented policy arrangement.
'The policy adjustment must relate to a shifting of significant subsidy expenditures to other needs which are more urgent, such as infrastructure investment, investment in the climate and public-service delivery improvements,' said Brumby. (ebf)
