Survey of recent developments
The economy continues along the general trajectory described in recent Surveys. Growth is picking up, led by consumption but restrained by investment. Inflation has fallen well below Bank Indonesia's current target rate. Most interest rates have followed suit, including key lending rates. Bank lending has been expanding at around 20% p.a. for the past year or so, and international portfolio investors are again interested in Indonesia. But a scare in the mutual funds industry and scandals at two state banks remind that trouble still simmers just below the surface in the financial sector. Fiscal policy continues its conservative stance. The government is likely to have achieved its 2003 deficit target, and the budget for 2004 envisages further narrowing of the deficit. Still, the deadline for achieving a modest budgetary surplus has slipped two years, to 2006. Draft amendments to the income tax law foreshadow a probable reduction in corporate tax rates, increases in personal rates, and removal of certain key exemptions. Proposed administrative changes would give tax officials significantly greater powers of investigation and prosecution; observers foresee increased scope for extortion by unscrupulous officials. Monetary policy has become increasingly expansionary, given the central bank's desire to support economic recovery and its success in driving inflation down. This is reflected in quite rapid base money growth and sharp falls in policy interest rates, notwithstanding some efforts by Bank Indonesia to slow their decline. Trade policy has been dominated by increasing signs of resurgent protectionism, including a shift away from a transparent tariff regime to rent-generating systems of licensing. On the political front, opinion polls in advance of the national elections suggest a considerable shift in the parliament, away from PDI-P in favour of Golkar. The size of this shift will be critical in determining the choice of candidates for the subsequent presidential elections. At present, Megawati Sukarnoputri remains the front-runner, but almost any combination of major parties could still form a coalition and make a credible run at the presidency. With elections looming, little further progress can be expected on the economic policy front in 2004. In these circumstances, the focus for progress shifts to a politically independent Bank Indonesia. With strong policies in its areas of responsi-bility—inflation, monetary policy and financial sector development—further progress is achievable even during an election year. This would lay a solid foundation for robust economic recovery, hopefully policy driven by the next administration.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 40 (2004)
Issue (Month): 1 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/CBIE20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/CBIE20|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ross H. McLeod, 2004. "Towards Improved Monetary Policy in Indonesia: Response to De Brouwer," Departmental Working Papers 2004-01, The Australian National University, Arndt-Corden Department of Economics.
- Andrew MacIntyre & Budy Resosudarmo, 2003. "Survey Of Recent Developments," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 39(2), pages 133-156.
- Asep Suryahadi & Wenefrida Widyanti & Daniel Perwira & Sudarno Sumarto, 2003. "Minimum Wage Policy And Its Impact On Employment In The Urban Formal Sector," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 39(1), pages 29-50.
When requesting a correction, please mention this item's handle: RePEc:taf:bindes:v:40:y:2004:i:1:p:9-35. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.