Coordinated and prudent macroeconomic policies have underpinned Indonesia’s steady economic growth amid global volatility and a series of unusually damaging natural disasters, according to the World Bank’s June 2019 Indonesia Economic Quarterly released today.
The country’s real GDP growth remained broadly stable at 5.1 percent during the first quarter of 2019. Despite global volatility, Indonesia’s economy has grown at a consistent pace with quarterly GDP growth remaining between 4.9 to 5.3 percent over the past 3.5 years.
“Indonesia’s prudent economic management has paid off. Despite capital outflows from emerging markets in 2018 that were larger than during the ‘taper tantrum’ in 2013, Indonesia’s economy remains strong, which helped reduce poverty to a record low of 9.7 percent in September 2018,” said Rodrigo A. Chaves, World Bank Country Director for Indonesia and Timor-Leste. “To accelerate growth from current levels, Indonesia needs further and sustained structural reforms, while maintaining solid fiscal and monetary policies.”
The country’s drivers of growth shifted over the first quarter of 2019. Growth in fixed investment decelerated from multi-year highs, while both private and government consumption picked up. This helped moderate the pressure on the current account deficit, which was large in 2018 in part because of imports used in infrastructure and private investments.
Indonesia’s economy is projected to grow at 5.1 percent in 2019 and then rise to 5.2 percent in 2020. This projection is supported by private consumption, which is expected to continue to accelerate as inflation remains low and labor markets strong. Further, a stronger fiscal position will allow more government investment including, new infrastructure projects and the reconstruction effort in Lombok and Palu following natural disasters.
Risks to Indonesia’s growth projection have increased with the recent re-escalation of global tensions that could further weigh on world trade.
This edition of the Indonesia Economic Quarterly also looks at the importance of the maritime economy to Indonesia’s economic development and sustainable growth. The country’s oceans could make a larger contribution to the economy through higher revenues from tourism and fisheries if better managed. Protecting Indonesia’s maritime assets from climate change and marine debris, will be critical to leverage their potential.
“The government of Indonesia has shown a strong commitment to making the country a global maritime powerhouse. Harnessing the full potential of Indonesia’s marine and coastal assets will require policies and investments to reduce plastic marine debris, sustainably manage fisheries, and protect corals reefs and coastal habitats to improve coastal livelihoods and boost Indonesia’s brand for high quality marine tourism,” said Ann Jeannette Glauber, World Bank Practice Manager for Environment and Natural Resources.
The Indonesia Economic Quarterly is supported by the Australian Department of Foreign Affairs and Trade.