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Manufacturing sector needs help to support growth
The manufacturing sector’s contribution to total gross domestic product (GDP) in the third quarter of 2017 was only about 19.93 percent, a declining share since 2014, i.e. about 21 percent.
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Activities in an automotive assembly plant for Suzuki-brand cars in Bekasi, West Java, in this file photo. (Kompas/Totok Wijayanto)
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ptimism over next year’s economic growth has been resonating recently as many institutions, including the government, Bank Indonesia (BI) and the International Monetary Fund (IMF), have unveiled their upbeat projections for Indonesia’s economic growth in 2018.
They forecast that the global economy will improve next year as it has been showing signs of recovery. The IMF predicts that the world economy will see higher growth in 2018 at 3.7 percent as compared to its estimate of 3.6 percent in 2017.
Moreover, the IMF also forecasts Indonesia will grow at around 5.2 percent in 2017. Likewise, the government has cited more realistic economic growth at 5.17 percent in 2017. As for 2018 growth, the government projects economic growth at 5.4 percent. In addition, BI has also set its economic target at a range between 5.1 percent and 5.5 percent, next year.
In the World Bank’s newly published Ease of Doing Business (EODB) 2018 index, Indonesia’s rank was lifted to 72nd position of 190 countries from the 91st position in the previous year. This achievement has led to greater confidence in next year’s economic growth.
Many have observed that this achievement is a result of the government’s efforts to simplify bureaucracy and regulations for business and investment. With the improvement in the ease of doing business in the country, investment is expected to increase next year.
According to the Central Statistics Agency (BPS), Indonesia’s economy grew at 5.06 percent year on year (yoy) in the third quarter this year, as compared to 5.01 percent in both the first and second quarters. The current state of economic growth indicates that the government needs to make extra efforts to achieve next year’s growth target of 5.4 percent or even meet this year’s target of 5.2 percent.
The economic growth in the third quarter was apparently driven by an increased contribution from the manufacturing sector to economic growth at 1.02 percent, compared to the previous quarter’s rate of only about 0.72 percent. The manufacturing sector also grew at 4.83 percent yoy in the third quarter of 2017.
