The World Bank (WB) has forecast that the Indonesian economy will remain strong and record a growth rate of 5.1 percent in 2017 and 5.3 percent in 2018.
In the WB’s Quarterly Economic Report, World Bank Country Director for Indonesia Rodrigo Chaves said that Indonesian economy can still grow more optimistically, spurred by such factors as conductive external environment, strong economic fundamentals and progress in structural reforms.
“The basics to boost the Indonesian economy are good policy reform, strong domestic demand, and contribution from the external environment,” he said.
The WB official also noted that household consumption will grow stronger and contribute to the economy coupled with hike in real wages and increase in employment opportunities.
Private investment will also benefit from a decrease in the Bank Indonesia’s interest rate that resulted in lower borrowing costs as well as an improvement in the business environment and public investment in the infrastructure sector.
According to Chaves, better and more well-planned infrastructure and the wealth of businesspeople will bolster the Indonesian economy. Infrastructure development has positive impact on the investment sector since the fourth quarter of 2015, he said.
The report also exposed some external risks, such as uncertainty arising due to the normalisation of monetary policy by the US Federal Reserve System (Fed), the weakening of commodity prices, and the protectionist trade policies implemented by developed countries, which could affect Indonesia’s economic growth.
Other risks arising from the domestic side will be the implementation of inconsistent structural reforms.