Apindo: Indonesia Can See Economic Growth of 5.5% in 2016
The Indonesian Employers Association (Apindo) is optimistic that Indonesia's economic growth will reach 5.5 percent year-on-year (y/y) in 2016, a figure that is higher than the projections set by the central government and central bank. Optimism of Apindo is based on expectations that public and private investment will increase next year on the back of an improved investment climate in Southeast Asia's largest economy, brought about by the series of economic stimulus packages that were unveiled by the government in recent months as well as political and social stability.
Apindo Chairman Hariyadi Sukamdani said improved government spending is evident through the Budget Execution Document (DIPA) and the number of projects on tender. Such projects include toll roads, harbors, and power plants. Infrastructure development is important as it will reduce Indonesia's high logistics costs, hence providing room for accelerated economic growth. Investment in Indonesia is expected to grow by 8.6 to 9.0 percent (y/y) next year supported by the government's deregulation packages.
Although Sukamdani sees several external risks, such as low commodity prices and slowing economic growth in China, he believes that an economic growth pace of 5.5 percent (y/y) is a realistic target for Indonesia. Regarding low commodity prices, he said Indonesia needs to reduce its dependence on commodity exports in order to enhance sustainable growth. Currently, commodities (-related products) account for about 65 percent of the country's total exports. Therefore, the government is currently focused on boosting the manufacturing sector. Sukamdani also believes the tourism industry has great potential of becoming a key foreign exchange earner.
The chairman of Apindo also emphasized that social and political stability in Indonesia has improved markedly since the late 1990s, evidenced by the country's peaceful regional elections last week (Indonesia is a young democracy and thus experiences growing pains). A stable political and social climate will contribute to accelerated economic growth.
Indonesia's Quarterly GDP Growth 2009–2015 (annual % change):
| Year | Quarter I |
Quarter II | Quarter III | Quarter IV |
| 2015 | 4.72 | 4.67 | 4.73 | |
| 2014 | 5.14 | 5.03 | 4.92 | 5.01 |
| 2013 | 6.03 | 5.81 | 5.62 | 5.72 |
| 2012 | 6.29 | 6.36 | 6.17 | 6.11 |
| 2011 | 6.45 | 6.52 | 6.49 | 6.50 |
| 2010 | 5.99 | 6.29 | 5.81 | 6.81 |
| 2009 | 4.60 | 4.37 | 4.31 | 4.58 |
Source: Statistics Indonesia (BPS)
Economic Stimulus Packages of the Indonesian Government:
| Package | Unveiled | Main Points |
| 1st | 9 September | • Boost industrial competitiveness through deregulation • Curtail red tape • Enhance law enforcement & business certainty |
| 2nd | 30 September | • Interest rate tax cuts for exporters • Speed up investment licensing for investment in industrial estates • Relaxation import taxes on capital goods in industrial estates & aviation |
| 3rd | 7 October | • Cut energy tariffs for labor-intensive industries |
| 4th | 15 October | • Fixed formula to determine increases in labor wages • Soft micro loans for >30 small & medium, export-oriented, labor-intensive businesses |
| 5th | 22 October | • Tax incentive for asset revaluation • Scrap double taxation on real estate investment trusts • Deregulation in Islamic banking |
| 6th | 5 November | • Tax incentives for investment in special economic zones |
| 7th | 4 December |
• Waive income tax for workers in the nation's labor-intensive industries • Free lasehold certificates for street vendors operating in 34 state-owned designated areas |
Further Reading:
• Analysis of Indonesia's Gross Domestic Product (GDP)