Cautious Optimism

BKPM and EuroCham host Indonesia Economic and Investment Outlook 2017

By Tellisa Ramadhani
Tuesday, February 14, 2017

An atmosphere of cautious optimism over Indonesia’s economic outlook for 2017 emanated from the Indonesia Economic and Investment Outlook 2017 on February 2. The event, co-hosted by the Indonesian Investment Coordinating Board (BKPM) and EuroCham, was opened by Ulf Backlund, Chairman of EuroCham Indonesia and H.E. Vincent Guerend, Ambassador of the European Union to Indonesia and Brunei Darussalam.

BKPM Chairman Thomas Lembong then spoke of how he sees the state of the Indonesian economy and his hopes for the future. He noted that the World Economic Forum meeting in 2016 had a somber tone due to the economic instability of the time. But, he also noted that as 2017 began, the rupiah appreciated by 2 percent. He also expressed optimism due to the fact that Indonesia has seen a gradual and stable recovery from the 2008 global financial crisis.

Lembong said Indonesia can expect greater volatility in its economy, but that would also mean higher growth. Domestically, Indonesia has to brace itself by being cautious and remaining optimistic. He reassured the audience that even though the government appears to be creating regulations that are more inward looking, eventually this will lead to outward looking regulations once the domestic economy is stable.

This was followed by a presentation by Bambang Brodjonegoro, Minister of National Development Planning. He noted that according to the International Monetary Fund (IMF), global economic growth, including Indonesia, is improving but remains moderate. The Indonesian economy is showing resilient growth, relying heavily on private and government consumption. In the business sector, the most visible growth is in the financial and insurance, manufacturing and information and communications technology (ICT) sectors.

The minister said if consumption keeps growing at 5 percent, the domestic economy will also grow by 5 percent. But relying on consumption is not sustainable and there needs to be improvement in investment to maintain growth. For the Indonesian economy to grow, investment needs grow by 5.4 percent to 5.6 percent. He also noted that it would be understandable if Indonesia’s economy slowed down slightly in 2017 due to uncertainties over the policies of the new US President Donald Trump and slower economic growth in China.

He noted that the government will put more focus on three priority sectors: tourism, agriculture, and manufacturing. Indonesia’s ease of doing business ranking has also risen from 106 in 2015 to 91 in 2016, and the outlook for economic growth in 2017 will be 5.1 percent to 5.3 percent.

The event concluded with two panel sessions. The first session comprised of Lembong and Brodjonegoro, and the second included business representatives and government officials from BKPM and BAPENNAS (the Ministry of National Development Planning). Both sessions answered questions on Indonesia’s strategy and how the global economic outlook would affect the nation.

In conclusion, the event was reasonably optimistic about Indonesia’s 2017 growth. Lembong and Bambang both reassured the audience that the Indonesian government is still encouraging foreign investment by making it easier for investors in tourism, agriculture and manufacturing.

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