Indonesia: Resilient Economy Can Benefit from Stronger Reforms
IMF News, February 3, 2017
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- Published: February 3, 2017
Key findings and headline statistics
- Indonesia’s growth at 5 percent for 2016—up from 4.8 percent in 2015—remains among the highest in large emerging market economies.
- Household consumption is a large driver of economic growth for the country and is strengthening due to people's improving purchasing power amid low inflation and a stronger rupiah.
Drivers of recent growth
- Strengthening household consumption supported by:
- improving purchasing power
- low inflation
- stronger rupiah
- Need for more investment to sustain and accelerate growth over the medium term.
Ongoing and recommended reforms to boost investment and growth
- Government has started reforms to improve the investment climate, including:
- expanding investment in public infrastructure
- reducing the layers of government regulations
- opening up new areas of the economy to private investment
- Fiscal measures:
- strategy to strengthen tax collection and broaden the tax base through tax reform to generate additional revenues to pay for priority government investment
Human capital and productivity
- Indonesia’s youthful workforce presents a major economic opportunity.
- Recommended reforms to narrow skills gaps between employer needs and worker skills:
- expanding vocational training opportunities
- measures to strengthen the economy’s productivity
External risks and outlook
- Positive domestic outlook is challenged by global uncertainties, including:
- policies from the new United States administration
- possible impact from China’s rebalancing and expected economic slowdown
- Policy emphasis:
- stand ready to manage short-term risks
- ramp up economic reforms to increase potential growth
IMF News — February 3, 2017
References
- https://www.imf.org/en/News/country-focus
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