世界银行-印度尼西亚经济季刊，2018年12月：加强竞争力（英文）-2018.12-67页-5mb

Indonesia Economic Quarterly - December 2018: Strengthening Competitiveness

Core Content

The Indonesia Economic Quarterly (IEQ) for December 2018 focuses on the importance of strengthening Indonesia's competitiveness in the global economy. It outlines key economic and fiscal developments in the third quarter of 2018 and proposes a reform agenda to enhance export and investment performance, which is essential for improving the country's external resilience and long-term growth prospects.

Main Points

1. Economic and Fiscal Update

• GDP Growth: Indonesia's real GDP growth eased slightly in Q3 2018 to 5.2% yoy, driven by domestic demand and strong gross fixed capital formation.
• Private Consumption: Private consumption growth slowed due to reduced equipment and health/education spending, but government consumption kept it stable.
• Net Exports: Net exports continued to drag on growth, despite eight consecutive quarters of export expansion.
• Inflation: Headline inflation eased to 3.1% yoy in Q3, partly due to a strong base effect from previous electricity tariff hikes.
• Current Account Deficit: The current account deficit widened to 2.7% of GDP in Q3, primarily due to high oil prices and increased import growth.
• Reserves: Reserves fell to USD 114.8 billion at the end of Q3, sufficient to cover 6.3 months of external debt and imports.
• Government Budget: The government budget deficit narrowed to -2.1% of GDP in 2018, supported by strong revenue growth and coordinated fiscal policies.
• Fiscal Outlook: The 2019 budget projects a further reduction in the deficit to 1.8% of GDP, underpinned by increased revenues.

2. Export and Investment Reform Agenda

• Competitiveness: To enhance global competitiveness, Indonesia must improve its export and investment performance, reduce structural imbalances, and boost productivity.
• Trade Barriers: Indonesia has significantly increased its trade barriers, including tariffs and non-tariff measures, which have made its goods and services less competitive.
• FDI Inflows: Indonesia lags behind its regional neighbors in attracting foreign direct investment (FDI), which is a critical factor in improving economic growth and competitiveness.
• Portfolio Flows: Reliance on volatile portfolio capital flows to finance the current account deficit has made Indonesia's financial system more susceptible to global shocks.
• Policy Recommendations:
  • Reduce Import Barriers: Lowering tariffs and non-tariff measures to improve competitiveness.
  • Implement FTAs: Enacting ambitious free trade agreements to enhance market access and catalyze policy reforms.
  • Ease FDI Restrictions: Reducing restrictions on foreign equity to attract more investment.
  • Attract Foreign Talent: Bringing in skilled workers to address domestic skill gaps.
  • Infrastructure and Human Capital: Closing infrastructure and human capital gaps to support long-term competitiveness.

Key Information

• Global Context: The global economic environment in Q3 2018 was marked by softer conditions, reduced trade growth, and financial market volatility.
• Challenges: Indonesia's economy faces risks from global trade tensions, weaker terms of trade, and continued tightening of monetary policy in the U.S.
• Structural Deficit: The current account deficit is driven by investment rather than consumption, but remains a structural challenge.
• Policy Framework: Indonesia's resilience is attributed to sound macroeconomic fundamentals and a coordinated policy approach.
• Reform Needs: Structural reforms are necessary to address distortions in production factor markets, improve competitiveness, and enhance productivity.

Summary of Figures and Tables

• Figure ES.1: GDP growth eased slightly in Q3, with domestic demand as the main driver.
• Figure ES.2: Manufacturing growth offset the moderation in agriculture, contributing positively to GDP.
• Figure ES.3: The goods trade deficit was the main driver of the current account deficit.
• Figure ES.4: The Rupiah depreciated against the USD in Q3, reaching a low of IDR 15,237 per USD.
• Figure ES.5: Headline inflation eased despite higher oil prices.
• Figure ES.6: The government budget deficit is projected to decrease in 2018 and 2019.
• Table ES.1: Real GDP growth is expected to rise to 5.2% in 2018, with a slightly higher forecast for 2019.

Conclusion

The IEQ emphasizes the need for structural reforms to enhance Indonesia's global competitiveness, export performance, and foreign investment inflows. It highlights that while Indonesia has shown resilience in the face of global volatility, it must take proactive steps to improve its external balance, productivity, and market access to sustain long-term economic growth. The report serves as a guide for policymakers, businesses, and analysts to understand and address the key challenges facing Indonesia's economy.