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BI urges structural reforms to boost growth
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Engineers work on oil and gas infrastructure to strengthen national energy security (ANTARA/R.Rekotomo)
B
ank Indonesia (BI) has called for structural reforms in the industrial sector to increase the competitiveness of local companies and strengthen downstream business activity.
BI Governor Agus Martowardojo said on Thursday that Indonesia’s economy had shown a positive performance last year despite external and domestic challenges, including the drop in commodity prices, hampering the country's commodity-based exports.
"It is essential to maintain macroeconomic stability and sustainable economic growth," Agus said at the publication of the central bank’s Indonesian Economic Report 2015.
He urged the government to implement macroeconomic policies -- both fiscal and monetary – that were disciplined, prudent, consistent and timely.
Agus said substantial synergies between authorities – be it BI, central and local government, as well as other regulators – should be exploited to support macroeconomic policies.
"We need to encourage a growing population and rising industrial share especially outside of Java and the integration into global value chains," he asserted.
The government should continue to strengthen maritime connectivity, promote tourism and improve institutional and human resource capacity, he said.
Agus said the structural reform agenda had yet to extend to food security, energy and water management. He added that coordination among stakeholders was required to improve agricultural productivity and address problems regarding production, distribution, marketing and institutions.
"We welcome the commitment and efforts of the government to maintain food supply, which in our opinion is critical for keeping inflation low and stable."
Agus also said the government needed to increase capacity in the energy sector with regard to the production and reserves of primary energy, the energy mix, and the accessibility and efficient use of energy and electricity. He also requested that fuel subsidies be more transparent and well targeted.
"And related to food and energy, our efforts to strengthen national water security must be combined with the conservation of water resources," he said.
He noted, however, that sustainable financing was needed to support these long-term efforts.
"Reforms are needed to improve the availability of long-term funding from domestic and foreign [sources], as well as the deepening of financial markets," Agus explained.
Indonesia's economy is expected to grow by 5.2 to 5.6 percent in 2016 and remain on an upward trend in the medium term, he said.
Inflation is projected to be maintained within the target range of 3 - 5 percent for 2016 to 2017 and 3.5 ± 1 percent over the medium term, he added.
"With a better economic structure and more diversified source of growth, the current account deficit is expected to remain subdued at a safe and healthy level," he ended.
The annual Indonesian Economic Report contains comprehensive analysis by the central bank's researchers on the national economy in the year preceding its publication.
The report also seeks to deliver lessons learned during that period, which can serve as the foundation for strengthening and improving future policy. (dan)
