ITB’s Studium Generale: Looking at the Economy a Year Ahead
BANDUNG, itb.ac.id - Indonesia's economic growth currently reaches above 5%. This is a pretty satisfactory achievement, considering Indonesia as a developing country. The growth is now at 5.07%, increased 0.04% from the previous year. However, the figure is still far from what is planned by the government in 2018.
The government's ambition to boost economic growth to 6.8% by 2018, as what has been stated in the ‘Nawacita’, seems unlikely to be fulfilled. This was said by Dr. Fithra Faisal Hastiadi, S.E., MSE., M.A at the Studium Generale general lecture on Wednesday (08/03/2018) at Aula Barat ITB. This lecturer at the Faculty of Economics, University of Indonesia, described the factors and background that affect the global economy, including in Indonesia.
During 2016-2017, global economic growth was slowing down. In Indonesia, this was said to be the result of rupiah depreciation that occurred during 2013-2014. But Fithra explained that rupiah depreciation is just a symptom.
"If we look at it, depreciated rupiah is actually just a symptom. If we talk about biological symptoms, when we get sick and followed by fever, the fever itself is not a disease, the fever is a symptom. It comes from the body's resistance to substance that goes inside the body, "he said. So, what is the real problem?
Indonesia's greater number of imports than exports caused a deficit to Indonesia's trade balance in 2012. More imports means more demand for dollars and thus it impacts the Rupiah exchange rate against the dollar. Export is the surplus of production, hence if exports are low, there must be problems inhibiting Indonesian production.
Indonesia's manufacturing industries contribute to 29% of Indonesia's GDP in 2001, but the number has declined gradually to this day. The inadequate infrastructures are behind the problem. Although we are now witnessing how the Indonesian government intensively boost infrastructure development, a step that is deemed appropriate, it will still take time.
Indonesia's logistic performance is not satisfactory either. In 2014, Indonesia perched on the world’s 43rd position, but currently dived into the world’s 63 position. Considering Indonesia that consists of 17,000 islands but has only 16,000 ships, compared to Singapore that has up to 90,000 ships, that is not surprising.
Impact of Foreign Economy Policy
Being one part of the world means being prepared for all events. What happens to one part of the world will certainly affect other parts of the world, no matter how small the impact will be. One of them is the election of Donald Trump as the 45th President of the United States in 2016 that changed US’ economic policy.
Once liberal in running its economy so that imported goods can enter easily, the US today restricts goods and people to enter from abroad so as to provide more opportunities for the people of the United States. Producers, such as China and Mexico, will certainly respond to this policy drastically too. This situation will get even worse if the United States’ decision to raise the entry fee is actually executed. Inevitable tariff war will occur, and moreover, it does not rule out the break of any physical war.
Trade Cooperation with Non-Traditional Countries
Economic growth is influenced by external and internal factors. Factors that come from outside (external) can be seen above. Internally, Indonesia needs a new source of economic growth. Exports are crucial to help improve the Rupiah exchange rate against the Dollar.
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