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More effort needed to achieve 7% growth: Economist

The Indonesian economy has shown improvement, but increased efforts are needed to achieve President Joko “Jokowi” Widodo’s target of 7 percent annual growth, according to CIMB Niaga chief economist Adrian Panggabean.

“Indonesia needs a savings rate of 39 percent of gross domestic product (GDP), if it wants its economy to grow by 7 percent,” he said in a media briefing in Jakarta on Monday.

When he took office in 2014, Jokowi expressed the hope that under his leadership, the economy would grow by 7 percent, but this is unlikely to be achieved because of the global economic slowdown.

With the current gross national savings of 31 percent, the economy is estimated to have grown by 5.1 percent in the second quarter, Adrian said, adding that annual growth for 2017 would likely reach 5.1 percent.

“That means that Indonesia needs an additional savings rate of 6 to 8 percent of GDP if it wants its economy to grow by 7 percent per annum,” he said.

Adrian said additional savings could be obtained from a number of funding sources in both the private and public sectors. In the private sector, for example, Indonesia could boost foreign direct investments (FDI) to 5 percent of GDP from the current 2 percent. In the public sector, the government could raise the tax-to-GDP ratio to at least 15 percent from the current 11 percent.

The capital market and mobilizing public savings could also provide other sources, he added. (dis/bbn)

Source: The Jakarta Post