JAKARTA: The International Monetary Fund has lauded Indonesia’s prudent mix of macroeconomic policies and structural reforms which have preserved stability amid challenging shifts in the global environment, an IMF end-of-mission statement released on Friday (03/02) said.
The Indonesian government managed to keep a robust economic growth of 5 percent last year compared to 4.8 percent a year earlier on the back of solid economic policies and increased household consumption, keeping it among large emerging market economies with the highest growth .
The IMF’s latest assessment is similar to its previous report in November. The Indonesian government expects a 5.1 percent growth this year.
“Private consumption remains the main driver of growth, but higher inclusive growth will require deeper structural reforms,” Luis E. Breuer, IMF mission chief for Indonesia, said in a statement dated Feb. 3.
The IMF encouraged the Indonesian government to continue expanding investment in public infrastructure, reducing over-complicated regulations and opening up new areas of the economy to private investment.
“Directors considered that the current monetary policy stance is broadly appropriate and encouraged the authorities to remain vigilant to the resurgence of inflationary pressures, and to stand ready to adjust the policy stance as needed,” the statement said. The IMF encouraged the government to strengthen tax collection and improve tax base through tax reform in a bid to generate additional collection to the state coffer.
It considered Indonesia’s banking sector “broadly healthy” and noted the efforts made by the country’s financial sector authorities to keep the sector’s stability in check.
The fund also reminded Indonesia to strengthen its economic productivity by investing in vocational training for workers, which will close the gap between what employers need and what employees have to offer.
These reforms should improve economic growth while providing a bumper from global uncertainties — including new policies from a Donald Trump-led United States administration and China’s economic slowdown. The executive board of the IMF concluded its “Article IV” regular consultation with Indonesia on Jan. 25.
During the consultation, a team of IMF economists visited Indonesia to assess its economic and financial development and discuss the country’s policies with representatives from the government and the central bank.
Bank Indonesia, in a separate statement, said it welcomed the IMF’s assessment and reinforced its commitment to maintain stability of Indonesia’s macroeconomic and financial system while at the same time optimizing its domestic economy amid global uncertainties.
“Bank Indonesia also supports the government’s structural reform programs to improve the country’s economic capacity and move toward inclusive growth,” Tirta Segara, an executive director at Bank Indonesia, said.
