Sustainable Economic Growth: Challenges And Policy Strategies

The last two decades was a very dynamic period, characterized by many challenges and important moments of performance of Indonesian economy. In the midst of two major crises, the Asian financial crisis of 1997/98 and the global financial crisis of 2008/09, stabilization and structural policy measures have been taken by the Government and Bank Indonesia, as well as related policy authorities to make the Indonesian economy recovers and grows stronger. The Indonesia's economic performance in the post global financial crisis is quite impressive, with an economic growth of around 5.5% averagely in the past five years, accompanied by a downward trend in inflation and the ratio of external debt to GDP, and the increasingly resilient financial sector in line with the improvement of business and investment climate. Amidst that impressive performance, the complexity of the structural challenges that are facing the Indonesian economy should be observed. In addition to fairly wide current account deficit, the quality of economic development need to be improved in order to be transmitted on improving quality of the social welfare at large. On a global scope, the competitiveness of the Indonesian economy in general also has to be strengthened further if Indonesia aim to become a major player in the era of the ASEAN Economic Community (AEC). To answer these challenges, the implementation of strong and consistent structural reform policies are sufficiently required. The structural reforms are expected to not only accelerate Indonesia's transition into developed economies and avoid the middle income trap, but also make the Indonesian economy grows in a sustainable level, in order to further reduce poverty and inequality. To achieve these ideal conditions, Indonesia is required to be able to further optimize the natural resource management, build reliability in the industrial sectors, build resilience in energy and foods, strengthen the financing structure of the economy, develop inclusive economic activities and strengthen the basic capital of national development. These strategic steps require pre-requisite of monetary stability and financial system stability, as elements of continuity in supporting the implementation of sustainable development.