2018年-世界发展银行全球_Indonesia_Economic_Quarterly_March_2018___Towards_Inclusive_Growth_87页_4mb

Summary of Indonesia Economic Quarterly (March 2018)

Core Content

The Indonesia Economic Quarterly (IEQ), published by the World Bank, provides an analysis of the country's economic performance and fiscal policies in the context of global trends. The report highlights the importance of inclusive growth, emphasizing the need for better and more targeted spending and increased revenue collection.

Main Points

Economic Performance in Q4 2017

• Real GDP growth accelerated to 5.2% yoy in Q4 2017, up from 5.1% in Q3, driven by stronger investment and increased domestic demand.
• Private consumption also saw marginal growth, partly due to eased inflation.
• Export and import growth moderated from a peak in Q3 but remained robust due to global trade and commodity price recovery.
• Net exports acted as a drag on growth, due to higher investment in capital goods and associated import increases.
• Inventories contributed positively to GDP growth after a significant rebound in Q3.

2017 Economic Overview

• GDP growth reached 5.1%, the highest in four years, due to stronger investment and net exports, supported by commodity price recovery, global growth, and trade flows.
• Current account deficit narrowed to 1.7% of GDP in 2017, the lowest in six years, thanks to improved terms of trade and recovery in global trade.
• Capital and financial account surplus shrank in 2017, despite surging capital inflows due to investor confidence and credit rating upgrades.
• Foreign direct investment (FDI) reached a seven-year high in 2017.
• Rupiah remained stable in 2017, though weakening in Q4 and early 2018 due to increased import demand and lower commodity prices.

Inflation Trends

• Headline inflation eased to 3.5% yoy in Q4, down from 3.8% in Q3, the lowest in 14 years.
• Food price inflation dropped to a 14-year low, though it increased slightly after December.
• Core inflation remained unchanged from Q3, the lowest on record, reflecting stable inflationary pressures as the economy approached near full employment.
• Monetary policy was eased in 2017, with two 25 bps cuts in Q3, and interest rates remained steady at 4.25% since September 2017.

Fiscal Policy

• Government spending grew at its fastest pace in 3 years, with capital, material, and social spending increasing.
• Capital expenditures reached 96.9% disbursement rate, up 18% in 2017, the highest in 8 years.
• Tax revenues as a share of GDP fell to less than 10%, but the exclusion of Tax Amnesty Program fees increased the tax ratio from 2016.
• Tax-to-GDP ratio excluding the Tax Amnesty Program rose in 2017, driven by higher commodity prices and reforms.
• Fiscal deficit in 2017 was 2.4% of GDP, the lowest in three years, and is expected to narrow to 2.3% in 2018.

Poverty and Employment

• Poverty rate fell to 10.1% in September 2017, the largest year-on-year decline since March 2013.
• Employment growth slowed, but shifted towards formal and manufacturing sectors.
• Job creation in the manufacturing sector reached 1.5 million in 2017, absorbing many agricultural workers.
• Real earnings for wage-employed workers declined sharply in the year to August 2017.

Economic Outlook

• GDP growth is projected to reach 5.3% in 2018, with positive trends expected through 2018–2020.
• Current account deficit is expected to widen to 1.9% of GDP in 2018, due to stronger domestic demand and weaker terms of trade.
• Headline inflation may increase in 2019, due to higher crude oil prices.
• Private consumption is expected to remain modestly strong in the next two years, supported by low inflation and stronger commodity prices.
• Risks to the outlook include slower global trade, monetary volatility, and potential weakening of private consumption.

Key Challenges and Opportunities

• Fiscal policy has supported growth and poverty reduction, but inequality remains high.
• Spending in priority areas such as infrastructure, health, and social assistance has been limited and ineffective, holding back growth and equity.
• Tax reforms are needed to increase revenue, improve efficiency, and enhance equity.
• Indonesia's tax-to-GDP ratio is among the lowest globally, and tax collection has been ineffective.
• Regressive energy subsidies have been reduced, and spending on social assistance has become more pro-poor.
• Education spending has increased, but student performance on PISA has not improved significantly.
• Stunting disproportionately affects poorer children, highlighting health and nutrition as critical areas for investment.

Policy Recommendations

• Indonesia needs to collect more revenues and spend better in priority areas to promote inclusive growth.
• Fiscal policy should focus on reducing inequality and enhancing social welfare.
• Reforms should aim to broaden the tax base, simplify the tax code, and improve compliance management.
• Efficient and growth-friendly revenue collection is essential to increase public spending in infrastructure, health, and social assistance.
• Continued reallocation of spending from energy subsidies to priority sectors is needed to enhance effectiveness.
• Strengthening fiscal space through further subsidy reductions is critical for sustained investment in key areas.

Conclusion

The report underscores the importance of fiscal policy in promoting inclusive growth and reducing inequality. While economic growth has been robust, inequality and poverty reduction have not kept pace, highlighting the need for more effective and targeted public spending and revenue reforms. The World Bank recommends a strategic reallocation of resources and enhanced compliance to support sustainable and inclusive development in Indonesia.