Indonesia's economy to grow by 5.4%

President Joko Widodo told Parliament yesterday that he expects Indonesia's economy to grow by 5.4 per cent next year, as the government forecast an increase in consumption, investments and better trade performance.

This is higher than the 5.1 per cent growth target he had set for this year.

Mr Joko, who had promised bureaucratic reforms and to cut red tape for business when he was elected in 2014, also said that Indonesia's ranking in the World Bank Ease of Doing Business index also improved from 106 in 2015 to 91 last year.

In May, Indonesia had an investment grade rating from all three major rating companies - Fitch, Moody's, and Standard and Poor's - on the back of a stable macroeconomic condition, Mr Joko added. This was its best ratings position since the 1997 Asian financial crisis.

"For 2018, the economic development will be directed at driving the economy of Maluku, Papua, Kalimantan, Sulawesi, Bali and Nusa Tenggara regions by increasing the connectivity of Java and Sumatra islands that so far have been the main drivers of the national economy," Mr Joko said.

Java, where the capital is located, is Indonesia's most populous island. Sumatra is its second largest island by population.

The President said it was due to the hard work by everyone that Indonesia grew by an average of 5 per cent a year between 2014 and 2016 despite the slowing global economy, weak commodity prices and an unfavourable geopolitical situation.

The 5.4 per cent growth target is realistic, said economists such as Mr Myrdal Gunarto of Maybank Indonesia, who had a slightly lower forecast of 5.3 per cent.

"Improving economic conditions in the developed nations will have a positive impact on Indonesia as it will get foreign investment and net exports, and this in turn will boost domestic spending by consumers as well the government," Mr Myrdal told The Straits Times.

The Joko administration has an ambitious plan to build power plants with total capacity of 35,000MW during his five-year term through 2019. Indonesia's electrification ratio was at 92 per cent at end-March, with Papua and Nusa Tenggara Timur recording the lowest ratio at 48.3 per cent and 59.2 per cent, respectively.

Singapore's Keppel Offshore and Marine is offering to supply Indonesia with liquefied natural gas that could be used as energy to generate power plants in regions across Indonesia, reported Katadata, a Jakarta-based online business-economic research firm, on Tuesday, citing Coordinating Maritime Affairs Minister Luhut Pandjaitan.

The gas from Keppel, Mr Luhut said, could be shipped to several regions in Indonesia, including Riau and Aceh provinces, to supply power plants with a capacity of between 25MW and 100MW.

A version of this article appeared in the print edition of The Straits Times on August 17, 2017, with the headline 'Indonesia's economy to grow by 5.4%'. Print Edition | Subscribe