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Survey Of Recent Developments

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  • Yuri Sato
  • Arie Damayanti

Abstract

Managing the Indonesian economy in 2015 has proved challenging for the administration of Joko Widodo (Jokowi). In a first quarter plagued by external adversity--especially a sharp drop in exports to China--coupled with internal political paralysis and the delayed disbursement of fiscal spending, the economy recorded its lowest rate of growth since 2009. Observing relatively stable inflation, Bank Indonesia (BI), the central bank, eased its policy rate in February by 25 basis points, to 7.5%. The bank also adjusted its macroprudential measures to counter declining bank lending. On the fiscal side, the expected stimulus from fuel-subsidy reallocation and aggressive public-capital spending did not arrive. Meanwhile, tax revenue made slow progress towards its ambitious target, which it seems unlikely to attain.Increases in supply costs made it difficult for the government to align domestic fuel prices more closely to the market. Major commodity exports fell significantly, but some manufactured exports showed hints of an upturn. The depreciation of the rupiah, the global strategies of leading investors, and the introduction of taxexemption policies that have been tested in neighbouring countries may have contributed to this trend. To further broaden the base of export diversification, the priorities should be to reduce business costs and enhance competition rather than enforce mandatory regulations. Jokowi has stressed that his focus on maritime development, part of a broader development strategy, includes reducing logistics costs.The second quarter of 2015 saw the start of several projects in Jokowi's flagship 'sea toll' program to improve maritime connectivity. There is a concern, however, that the predominance of state-owned enterprises (SOEs) in strategic port operations will continue to limit competition and reduce efficiency. Jokowi's development strategy also focuses on reducing inequality. His government has implemented several distribution and redistribution policies, including the national social-security system initiated by the previous administration. The system suffered financially in its first year from low participation among those in the informal sector.

Suggested Citation

  • Yuri Sato & Arie Damayanti, 2015. "Survey Of Recent Developments," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 51(2), pages 165-188, August.
  • Handle: RePEc:taf:bindes:v:51:y:2015:i:2:p:165-188
    DOI: 10.1080/00074918.2015.1061909
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    References listed on IDEAS

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    1. World Bank, 2015. "Indonesia Economic Quarterly, July 2015," World Bank Publications - Reports 22341, The World Bank Group.
    2. World Bank, 2015. "Indonesia Economic Quarterly, March 2015," World Bank Publications - Reports 22505, The World Bank Group.
    3. World Bank, "undated". "World Bank East Asia and Pacific Economic Update, April 2015," World Bank Publications - Reports 21737, The World Bank Group.
    4. World Bank, 2015. "Indonesia Economic Quarterly, December 2015," World Bank Publications - Reports 24437, The World Bank Group.
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    Cited by:

    1. Yuri Sato, 2016. "Comment on “Improving Connectivity in Indonesia: The Challenges of Better Infrastructure, Better Regulations, and Better Coordination”," Asian Economic Policy Review, Japan Center for Economic Research, vol. 11(2), pages 241-242, July.

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