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World Bank estimates Indonesia to grow at 5.3 percent

Jakarta (ANTARA News) – In the Indonesia Economic Quarterly report released here on Wednesday, the World Bank has forecast that Indonesias gross domestic product will reach 5.3 percent in 2017.

According to the report, Indonesias fiscal policy credibility has been improving coupled with more realistic revenue setting mentioned in the Budget 2017.

“In the Budget 2017, there has been an improvement in the quality of government spending, and fund allocation has been maintained for development in areas of infrastructure, health, and social assistance,” World Bank Country Director for Indonesia Rodrigo Chaves stated.

He believes that the government budget is allocated to realize better targets for energy subsidies and social assistance programs for the poor.

“It is important for Indonesia to maintain the momentum of the reforms in order to achieve development targets effectively,” Chaves noted.

According to the World Bank report, two steps can be taken to improve the quality of government spending.

Firstly, expenditure should be relocated to the priority sectors of infrastructure, health, and social assistance, with low-level expenditure that can have a positive impact on poverty reduction and growth.

Secondly, maximizing the impacts of spending in all sectors, including agriculture, education, and social assistance.

The report also highlighted that better growth in 2017 will be supported by private investment, which has shown an increase, due to the monetary policy in 2016 and a better investment climate.

Private consumption is also expected to increase in 2017 due to low inflation and improving consumer confidence, which is supported by the stable value of the rupiah.

However, low revenue poses risks in lowering the growth due to global policy uncertainty and financial turmoil in financial markets.

To increase tax revenues, Indonesia needs to accelerate administrative reforms and tax policies.

Meanwhile, continuous recovery in the commodity prices can increase growth risk.(*)