Group 2
·
Dhiyo Athobarani Djuharia (21216950)
·
Ferdi Adha Apriansyah (22216785)
·
Nabilah Farhaty (25216229)
·
Nurul Hijriyati (25216621)
·
Reynaldo Desta (26216245)
·
Yulfit Afrilda (27216045)
The economic challenges facing
Jakarta
ALMOST
200 million Indonesian voters head to the polls on Wednesday after a long
presidential election campaign dominated by economic policy issues.
The
eventual winner - the incumbent President Joko Widodo or former general Prabowo
Subianto - will face significant challenges in steering Southeast Asia's
biggest economy. Mr Joko is making a big infrastructure push and raising social
welfare spending, while his challenger is promising tax cuts and import curbs
to spur domestic industries.
Regardless
of the outcome, the new administration will face a number of key challenges:
Economic
growth has averaged about 5 per cent a year since Mr Joko took office in 2014,
well short of the 7 per cent he targeted in his first term. The current
government is projecting growth of 5.3 per cent this year and as much as 5.5
per cent in 2020, which would be the fastest expansion since 2013. That may be
challenging against a global backdrop of slowing world growth, unresolved
US-China trade tensions and volatile oil prices.
The
campaign team for Mr Prabowo has said his policies, including corporate and
personal income tax cuts, would result in growth of about 5 per cent over the
first two years of a five-year presidential term and 7 per cent growth by the
third year.
The
jobless rate is near a 20-year low of 5.34 per cent, which looks good on paper,
but hides a growing problem of underemployment. The number of people working
less than 35 hours a week has been increasing, one of the reasons economists
cite for lacklustre spending in the economy.
Almost
36 million people, near close to a third of the workforce, are classed as
underemployed, according to official statistics.
Mr
Joko's campaign says Indonesia needs to create 100 million jobs in the next
five years in an economy where more than half the population of 260 million are
under the age of 40.
The
current account deficit, which last year widened to almost 3 per cent of gross
domestic product, remains a key vulnerability for the economy. It makes
Indonesia reliant on foreign capital to fund its import needs, inflows that can
be volatile as investor sentiment swings.
The
deficit was one of the main reasons why Indonesia was targeted in an emerging
market sell-off last year, triggered by rising US interest rates and a stronger
dollar. The rupiah slumped more than 5 per cent against the dollar in 2018,
dropping to its lowest levels since the Asian financial crisis two decades
prior, as investors pulled out of the nation's stocks and bonds.
The
rupiah has bounced back in 2019, helped in part by the central bank's swift
action in raising interest rates by 175 basis points and the US Federal
Reserve's shift away from policy tightening this year. The current account
remains a risk though, and the government has imposed a number of measures to
curb imports and spur exports to lower the deficit.
Indonesia
has been making slow progress in opening up its economy to foreign investors.
Many are still waiting for authorities to overhaul the so-called negative
investment list, which dictates levels of foreign ownership allowed in a host
of sectors.
Foreign
direct investment dropped 8.8 per cent in 2018, the first decline under Mr
Joko's rule. The government's tussle with Freeport-McMoRan Inc over ownership
of the world's biggest gold mine also hurt sentiment.
Indonesia
needs foreign investment to help pay for its development, including a massive
infrastructure gap the World Bank Group has said would cost hundreds of
billions of dollars to fix. The next government would have to convince foreign
investors that Indonesia is open for business.
Inflation
has come down steadily over the years, staying under 5 per cent since 2016.
With little price pressures in the global economy, inflation in Indonesia has
slowed to a 10-year low of 2.5 per cent in March. It's forecast to remain
inside the central bank's 2.5 per cent to 4.5 per cent target band this year.
Despite
the slowdown, voters continue to cite the cost of living as a key election
issue, along with jobs. The government has managed to cap fuel prices ahead of
the election, but a jump in oil prices this year will make that difficult to
sustain.
Low
inflation and the global shift away from policy tightening have fuelled calls
for Bank Indonesia to start cutting interest rates after six hikes since May.
Governor Perry Warjiyo remains cautious though, warning of risks in the global
economy.
Paraphrase:
People
of Indonesia on Wednesday April 17 the polls to choose who will lead.
Among
Mr. Joko Widodo or Mr. Prabowo will face the challenge of directing the
Indonesian economy to a better stage. Mr. Joko Widodo made a pushlarge infrastructure and increase
social welfare spending,
The new government will face a
number of major challenges:
Economic
growth has averaged around 5 percent per year since Mr. Joko took office in
2014, far below the 7 percent he was targeted in the first term. The government
is currently projecting growth of 5.3 percent this year and by 5.5 percent in
2020, which would be the fastest expansion since 2013. This is a challenge
against the background of slowing global growth of the world, the US-China
trade tensions unresolved and volatile oil prices.
While
Mr. Prabowo policies that cutting personal and corporate income tax,will produce growth of about 5 percent
during the first two years of the presidential term of five years and a 7
percent growth in the third year.
The
lowest unemployment rate at 20 percent this year at 5.34 per cent, things
looked good for real, but hide the existing problems of underemployment. The number of
people working less than 35 hours a week has increased, it is one cite economic
reasons for the lackluster spending in the economy.
Campaign
Mr. Joko said Indonesia needs to create 100 million jobs in the next five years
in an economy where more than half the population of 260 million are under the
age of 40.
Last
year, the deficit widened by nearly 3 percent of gross domestic product, it is
vulnerable to the economy.That
makes Indonesia dependent on foreign capital to finance imports, which can be
volatile inflows as investor sentiment swings.
The
rupiah rose again in 2019, partly helped by the quick action the central bank
raised interest rates by 175 basis points and the US Federal Reserve's shift
away from a policy tightening this year. The current account remains a risk
though, and the government has enacted a number of measures to curb imports and
boost exports to reduce the deficit.
Indonesia
has made slow progress in opening its economy to foreign investors. Many are
still waiting for the authorities to overhaul the so-called negative investment
list, which determines the level of foreign ownership allowed in various
sectors.
Foreign
direct investment fell 8.8 percent in 2018, the first fall under the government
of Mr. Joko. Government struggles with Freeport-McMoRan Inc. over ownership of
the world's largest gold mine also hurt sentiment.
Indonesia
needs foreign investment to help pay for its development, including
infrastructure gaps massive World Bank Group said it would cost hundreds of
billions of dollars to repair. The next government must convince foreign
investors that Indonesia is open for business.
Inflation
has dropped steadily over the years, staying below 5 percent since 2016. With
little price pressures in the global economy, inflation in Indonesia has slowed
to a 10-year from 2.5 percent in March. It is expected to remain in the central
bank's 2.5 percent to 4.5 per Band objectives percent this year.
Despite
the slowdown, voters continue to cite the cost of living as a key election
issue, along with the job. The government has managed to cap fuel prices ahead
of elections, but this year's surge in oil prices will make it difficult to
maintain.
Low
inflation and a global shift away from the policy tightening has sparked calls
for Bank Indonesia to start cutting interest rates after six hikes since the
May. Governor Perry Warjiyo remains cautious though, warning of risk in the
global economy.
