T

he news from the economic sector has been quite encouraging of late, in striking contrast to the noisy criticisms of what observers have called a corruption-infested legislative election last month.

The Central Statistics Agency (BPS) announced last Friday a US$673 million trade surplus for March as exports rose by 1.24 percent, compared to a decline of 3 percent in February and 5.8 percent in January, while imports dropped by 2.34 percent. Combined with the surplus earlier in February, the first quarter thus booked a total trade surplus of $1.5 billion.

This positive development should certainly be attributed to the package of policy measures launched in January and the money tightening by the central bank to dampen demand for imports. Even more encouraging is that inflation also moderated, partly due to the rupiah appreciation over the past two months.

Also last week, the 2011 report of the International Comparison Program (ICP), sponsored by the World Bank, ranked Indonesia as the world'€™s 10th-largest economy, up five places from its ranking in 2005, with a total gross domestic product (GDP) of $2.05 trillion (based on purchasing power parity [PPP]) and $8,539 GDP expenditure per capita.

While these developments should be welcomed as confidence-building news, the government should not allow this good news go to its head, especially when it comes to the urgent need to accelerate structural reform.

As it happened, 2011 saw Indonesia'€™s highest economic growth (6.5 percent) in over 10 years. Unfortunately, the pace of economic expansion declined to 6.3 percent in 2012, down further to 5.8 percent last year and is estimated to stall below 6 percent this year. The first quarter even saw a growth of only 5.2 percent.

Even though investment has begun increasing robustly, consumer spending has remained the main locomotive of the economy. Rather worrisome is the preference of new investors for capital-intensive businesses. This could worsen the inequality in income distribution with all its negative ramifications on social and political stability.

We are glad though to learn that the government seems not to be complacent as regards the challenges head. Finance Minister Chatib Basri asserted last week that the 2015 budget proposal the government is now preparing for submission to the House of Representatives in mid-August would remain conservative with a growth projection of 5.5-6.3 percent.

The government even foresaw a weaker rupiah at a range of 11,500 to 12,000, compared to the average 10,500 assumed for the current fiscal year. Indeed, given the global economic uncertainty and the slowdown in China '€” currently Indonesia'€™s largest trading partner '€” there is not much leeway for the government to do pump-priming.

The new government that will take office in October should not read too deeply into the World Bank report on the economic ranking. It should instead analyze thoroughly the downside risks of a worsening external trade balance because the market for most of our major commodities remains fragile.