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Dream fades as Indonesia seeks stability

Jun 01. 2018
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INDONESIA has now all but given up on the economic growth target set by President Joko Widodo when he swept to power four years ago. Stability is now the priority amid a market selloff that’s already prompted two interest-rate hikes, with more likely to come.

Jokowi came into office promising to deliver annual gains of 7 per cent by the time his first term was done. He’s now preparing to seek re-election in a race set to kick off in September, having missed his goal by a wide margin.

The economy may grow as much as 5.8 per cent next year, Finance Minister Sri Mulyani Indrawati told lawmakers on Thursday -that would still be the fastest pace of expansion since 2013. 

It’s a sizable downgrade from August, when the government forecast growth of as much as 6.5 per cent in 2019.

“In the short run, economic stability must be sought first instead of just pursuing growth,” Indrawati told the parliament. “That way, the government’s policy mix will be able to give optimum contribution in boosting economic growth in mid-term and long-term.”

With interest rates rising in the US and the dollar gaining strength, Indonesian fiscal and monetary authorities have gone on the defensive and sought to halt a rout in the currency. That’s seen Bank Indonesia go from easing monetary policy eight times in two years to raising its key interest rate for a second time in two weeks on Wednesday.


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