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Indonesia is projected to post an economic growth of 6 percent this year and 6.3 percent next year, with its healthy economy able to weather the continuing global uncertainty, the International Monetary Fund (IMF) predicts in its annual health check of the country’s economy.

“Corporate and financial sector balance sheets are healthy, and the sharp reduction in the public sector debt burden has provided the authorities with room to respond with further stimulus if needed,” said the IMF’s mission chief for Indonesia, Sanjaya Panth.

IMF economists said Indonesia’s growth is expected to ease to 6 percent in 2012 from 6.5 percent in 2011, with weaker external conditions likely to be offset by moderate fiscal stimulus.

The country’s growth rate is then projected to recover to 6.3 percent next year and, with the right policies, is expected to rise further over the medium term, provided global economic conditions remain broadly favorable.

But Panth also warned that risk perceptions remain elevated, contributing to a decline in international reserves in the past year, and underscoring the importance of addressing policy uncertainties.

“To a large extent, global factors lie behind recent weaknesses but domestic policies have also played their part,” he said.

While lauding the country’s solid fundamentals, prudent macroeconomic policy, and structural reforms over the last decade, IMF economists said sustaining growth would require further reforms.

These include improvements in both the allocation and administration of government spending, laying down a sound legal framework for the good management of a major financial crisis, and increasing public infrastructure investment.

The IMF also called for maintaining the momentum of structural reforms, reforming Indonesia’s labor laws, and improving the business climate through an open foreign trade and investment regime.

 

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