The International Monetary Fund (IMF) projects Indonesia`s economy in 2018 will reach 5.3 percent, or one percent lower than what the government targeted. Nevertheless, the IMF believes Indonesia's economic growth is still quite good and can reach 6.5 percent in the next few years.
"When compared to other countries, the Indonesian economy is doing well. Many countries want to learn from Indonesia," IMF Asia Pacific division head Luis Enrique Breuer told reporters in Jakarta, Tuesday, November 14.
Luis reminded that to achieve the 5.3 percent growth target, the government needs to maintain three things; financial discipline, inflation rate and macroeconomic stability.
Luis also said that the government needs to improve the ability to react to external factors. The Indonesian government, he said, should be wary of several factors, such as global economic growth, Chinese growth and the US interest rates.
"To me, Indonesia has a buffer to respond to external sentiments. When oil prices are up, it is good for Indonesia. But it's bad when there is a slowdown in China or a rapid hike of US' interest rates," he said.
Luis also asked the government to modernize regulations because the implementation of decentralization requires the alignment of rules between central and local governments.
He also said that the government must improve education for the young population, who will enter the labor market every year. This, he said, will create the potential for economic growth.
"Growth targets can be achieved if the government is able to generate jobs, so the country benefits from demographic dividends," he said.
The IMF's fifth recommendation is for the Indonesian government to fix less efficient financial sectors. "The OJK (Financial Services Authority) has too many rules," Luis remarked.