IMF国际货币组织全球-Indonesia_2019-Article-IV-Consultation_83页_5mb

2019 Article IV Consultation with Indonesia Summary

Core Content

The 2019 Article IV Consultation with Indonesia, conducted by the International Monetary Fund (IMF), assessed the country's economic performance, outlook, and policy responses to external and domestic challenges. The consultation concluded on July 3, 2019, following discussions from May 14, 2019, and a staff report finalized on June 12, 2019. The main focus was on maintaining macroeconomic and financial stability, addressing structural vulnerabilities, and enhancing growth potential.

Main Points

Economic Performance in 2018

• Growth: Stabilized at above 5 percent, driven by strong domestic demand.
• Inflation: Eased to around 3 percent, near the lower bound of the target band (3.5±1 percent).
• Current Account Deficit (CAD): Widened to 2.98 percent of GDP in 2018, mainly due to lower commodity exports and higher infrastructure-related imports.
• Credit Growth: Recovered to 12 percent, supported by strong bank balance sheets and economic growth.
• Public Finances: General government revenue remained below peer countries, and the fiscal deficit was at 1.8 percent of GDP in 2018.

Economic Outlook

• Growth: Projected to remain stable at 5.2 percent in 2019 and 2020, with potential to reach 5.3 percent in the medium term.
• Inflation: Expected to stay within the target band.
• CAD: Projected to narrow gradually to 2.6 percent of GDP.
• Fiscal Deficit: Likely to remain constant at 1.8 percent of GDP.
• Risks: Tilted to the downside, mainly external, including trade tensions, tighter global financial conditions, and volatility in commodity prices.

Policy Recommendations

• Monetary Policy: Maintain flexibility, with cautious relaxation unless capital account pressures reemerge.
• Exchange Rate: Allow it to move with market forces, with FX intervention limited to preventing disorderly conditions.
• Fiscal Policy: Keep a neutral stance to protect buffers and support growth.
• Macroprudential Policy: Focus on containing systemic risks.
• Structural Reforms: Implement a comprehensive package to enhance potential growth, including tax reform, financial deepening, and labor/product market reforms.

Key Issues

Structural Vulnerabilities

• Low Tax Revenues: Limit the government's ability to finance development goals.
• Shallow Financial Markets: Increase reliance on volatile capital inflows.
• Labor and Product Market Rigidities: Constrain growth and need to be addressed to harness the demographic dividend.

Fiscal and Debt Sustainability

• Debt Levels: Public and private external debt reached 36.9 percent of GDP in 2018, with a moderate and sustainable risk profile.
• Reserves: International reserves declined to US$121 billion in 2018, but are expected to recover to US$124.5 billion by March 2019.
• Contingent Liabilities: Risks from state-owned enterprises and public-private partnerships require monitoring.

Financial Sector Oversight

• FSAP Recommendations: The IMF encouraged continued efforts to strengthen financial oversight and crisis management frameworks.
• Supervisory Framework: Need to clarify mandates, improve supervision of nonbank financial institutions, and enhance legal and regulatory structures.

Summary of Key Economic Indicators

Summary of Policy Discussions

• Exchange Rate Flexibility: Should continue to reflect market forces.
• Capital Flow Reversals: Remain a key risk, especially with reliance on volatile portfolio inflows.
• Reforms: Necessary to boost potential growth, including tax reform, financial deepening, and improving the business environment.
• Fiscal Reforms: Need to implement a medium-term revenue strategy to reduce dependence on external financing.
• Financial Sector: Requires stronger oversight and crisis management frameworks.

Conclusion

The IMF acknowledged the Indonesian authorities' efforts in maintaining macroeconomic stability and protecting buffers during 2018. However, it emphasized the need for continued structural reforms to address vulnerabilities, enhance growth, and improve resilience against external shocks. The consultation also highlighted the importance of maintaining exchange rate flexibility and improving the quality of fiscal spending to align with development goals.