World Economy

Indonesia Predicts 5.6% Growth

Indonesia Predicts 5.6% Growth
Indonesia Predicts 5.6% Growth

Indonesia’s economy is expected to grow by between 5.2 and 5.6% next year, the central bank governor said on Monday.

Agus Martowardojo told a parliamentary hearing that government spending on infrastructure is expected to drive higher growth in Southeast Asia’s biggest economy, Reuters reported.

“The prospect of improvement in the economy in 2017 will be supported by investment growth…and fiscal stimulus especially in infrastructure projects and the government’s economic policy packages,” he said.

Martowardojo added that annual inflation next year is estimated at 4% in anticipation of rising food commodity prices.

He added the rupiah is expected to trade in the range of 13,600 and 13,900 against the US dollar next year.

Poverty rates in Indonesia have been steadily declining for many years. But the gap between rich and poor has been widening. And that’s a worry for President Joko Widodo, or Jokowi, whose core support comes from lower income groups.

“So it makes a burden for Jowoki to make sure the government is moving in the right direction to decrease the poverty,” Mohamad Fahmi, and economist at the University of Padajaran said.

Jokowi’s 18 months in office have thrown up big economic challenges with slowing demand, and sliding prices of commodities such as hydrocarbons, palm oil and minerals on which the country has been relying. Last year’s growth was less than 5%, with economists believing Indonesia is capable of doing much better.

The government is aiming to swiftly diversify the economy—reducing reliance on commodities and developing sectors such as manufacturing, e-commerce, and tourism to places other than Bali.