Trade Trumped

US policy under Trump may cut Indonesia's 2017 growth pace: minister

By Hidayat Setiaji
Tuesday, December 13, 2016

Indonesia's growth pace in 2017 will be reduced by nearly half a percentage point if Donald Trump as United States president implements all the policies he advocated while campaigning, the development planning minister said on Thursday (08/12).

For next year, Indonesia has set a growth target of 5.1 percent, just above the 5.0 percent as expected this year.

But Bambang Brodjonegoro, who was finance minister until a cabinet shuffle in July, said if the United States carries out all the policies Trump has pushed, including a 45 percent tariff on imports for China, there will be an impact on Southeast Asia's largest economy.

"According to our simulation, if Trump really does all that under an extreme scenario, it would make global growth weaker and would result in our GDP growth slowing by 0.41 percentage point in 2017," Brodjonegoro said.

"Although I'm not sure he would be that extreme, we have to look at all possibilities," he said.

Brodjonegoro said an economic slowdown in China might pose a greater risk to Indonesia. If China's growth is only 6 percent next year – it's on track for 6.7 percent this year – that could reduce Indonesia's 2017 growth rate by 0.72 percentage point, he said.

He said the government plans to improve the implementation of its infrastructure projects as well as spend its money timely to maintain the country's growth momentum next year.

China and the United States are among Indonesia's biggest trading partners and also big sources of foreign direct investment.

Indonesia is struggling to mount a solid rebound after growth last year slowed to 4.8 percent, the weakest since 2009.

Hit by low global commodity prices, slower growth for its major trading partners, tepid foreign investment and infrastructure bottlenecks, Indonesia's growth has slowed in each of the past five years.

This article first appeared on the Jakarta Globe's website on December 8, 2016.

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