Even though weakening global growth and world trade continues to pull down Indonesian exports and consequently its economic growth, Southeast Asia’s largest economy is projected by the Asian Development Bank (ADB) to achieve a 5.2 percent rate of expansion this year, slightly higher than the 5.17 percent last year and the 5.07 percent in 2017.
If we see economic performance entirely through the prism of politics — which is how most critics have been attacking the government over the past few months of the election campaign — the growth is indeed much lower than the 7 percent President Joko “Jokowi” Widodo promised at the outset of his administration in late 2014.
However, if we assess the growth from a global perspective, a 5 percent economic expansion is not too bad and it is even one of the highest among the emerging economies. Even the economy of China, the world’s second-largest powerhouse, has fallen to below 7 percent from the 9 to 10 percent previously.
The ADB’s latest flagship annual report on Asian economies, called the Asia Development Outlook, which was issued on Wednesday, foresees the average Asian economic growth this year only at about 5 percent because of the uncertainty about the global economy and the increasing protectionist trends in many developed countries.
Certainly, stronger domestic investment and robust domestic consumption would continue to be the main drivers of growth, more than offsetting weaker export growth. Domestic consumption would be much stronger this year because of the combined boosts from spending on the preparations for the April 17 presidential and legislative elections. Moreover, the annual consumption peak is to take place during the Ramadan fasting month in May and the Idul Fitri celebrations early in June.
The ADB also shares the government’s optimism that economic growth is to rise higher next year to 5.3 percent. We, however, only share this rosy projection with qualifications. If the coming elections run smoothly and peacefully and do not end up with a long stalemate and do not bring in a new government, investment would boom in early 2020 because the basic economic policies of the present government are already on the right path of gradually improving the general business climate, continuing bureaucratic and economic reforms and attacking the wide inequality in income distribution and asset ownership.
Put another way, the Jokowi administration has rightly been focusing on building physical infrastructure to improve connectivity between the islands and the rural and urban areas and soft infrastructure through the various reforms for institutional capacity building, notably to develop a clean, efficient and competent system of governance.
We are, however, apprehensive that the rate of economic growth may decrease next year if the election brings in a new government because investment may temporarily slow down to await the basic economic policy guidelines of the new president and the new balance of political power in the House of Representatives.
Disclaimer: The opinions expressed in this article are those of the author and do not reflect the official stance of The Jakarta Post.