Government of Indonesia Optimistic that GDP Growth Target Can Be Met

Indonesia’s Coordinating Minister of Economic Affairs Hatta Rajasa stated that, although he understands the downward revisions for economic growth by the two aforementioned institutions, the key for accelerated growth lies with the government. If the government manages to curb the current account deficit further (particularly the deficit in Indonesia's oil & gas sector), while safeguarding people’s purchasing power by fostering low inflation, the target can be met.

In an attempt to curtail the current account deficit of Indonesia, a third economic policy package will soon be revealed. The exact content is not known yet as it still needs discussion among the relevant ministries, but Rajasa had previously stated that this third package will deal with foreign companies' profit repatriation. The Indonesian government intends to make it more attractive for companies to re-invest profits in Indonesia.

In August and December 2013, the government had already implemented two policy reform packages as Indonesia's wide current account deficit (which hit a record high of USD $9.9 billion in the second quarter of 2013) and high inflation in combination with the looming end of the US Federal Reserve's quantitative easing program led to large capital outflows, resulting in sharp rupiah depreciation and a plunging stock market.

Although unconfirmed, there is speculation that the government will revise the country’s Negative Investment List (Daftar Negatif Investasi) in order to attract more foreign direct investment (FDI). The Negative Investment List states which sectors of the Indonesian economy are (partly) closed to foreign investment.

Further Reading:

• 1st Package: Indonesian Government Releases 'Emergency Plan' to Support Economy
• 2nd Package: Indonesia's New Fiscal Policies to Curb Imports and Support Exports

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