DBS Bank Singapore
economist Eugene Leow said the Indonesian government should move from
primary to secondary sectors for sources of state revenues to maintain
growth momentum.
"It is important for Indonesia to move from primary to secondary sectors for sources of state revenues due to an economic slowdown in China that would affect national economic growth," he said at a discussion here on Friday.
He said economic changes in China would have a real and direct impact on Indonesia as that country receives an average 10 percent of the country`s exports.
He said burdens on the state budget, external accounts, and banking system liquidity were caused by two things in China namely economic slowdown and a shift in growth-oriented tendency from quantity to quality.
"It means China will increase purchase of half-processed or processed products rather than raw materials," he said.
In view of that he suggested that the government moved from commodities and entered secondary sectors such as manufacturing, production and construction if it wished to maintain the momentum of growth.
Eugene said he hailed the government`s decision to raise the subsidized fuel prices and the Bank Indonesia reference rate by 50 basis points to 6.5 percent. But he also admitted that it would still be difficult to maintain the momentum with only the decisions.
"At this stage financial stability is more important for Indonesia than increasing the GDP rate," he said.
He said the recent fuel price hike of 33 percent would indeed cause inflation to rise up to eight percent in the short term but he believed it would only be temporary and it would not have a long-term effect on personal consumption as the country`s main economic driver.
Eugene said Indonesia`s foreign debt has dropped significantly for the past 15 years while its foreign exchange reserves has also declined in the past few years but were still above the level of the state`s foreign and short-term debts.
He said BI`s decision to raise its reference rate by 50 basis points to overcome rupiah depreciation had put the country`s economy in a relatively safe position away from global economic worries.
"It is important for Indonesia to move from primary to secondary sectors for sources of state revenues due to an economic slowdown in China that would affect national economic growth," he said at a discussion here on Friday.
He said economic changes in China would have a real and direct impact on Indonesia as that country receives an average 10 percent of the country`s exports.
He said burdens on the state budget, external accounts, and banking system liquidity were caused by two things in China namely economic slowdown and a shift in growth-oriented tendency from quantity to quality.
"It means China will increase purchase of half-processed or processed products rather than raw materials," he said.
In view of that he suggested that the government moved from commodities and entered secondary sectors such as manufacturing, production and construction if it wished to maintain the momentum of growth.
Eugene said he hailed the government`s decision to raise the subsidized fuel prices and the Bank Indonesia reference rate by 50 basis points to 6.5 percent. But he also admitted that it would still be difficult to maintain the momentum with only the decisions.
"At this stage financial stability is more important for Indonesia than increasing the GDP rate," he said.
He said the recent fuel price hike of 33 percent would indeed cause inflation to rise up to eight percent in the short term but he believed it would only be temporary and it would not have a long-term effect on personal consumption as the country`s main economic driver.
Eugene said Indonesia`s foreign debt has dropped significantly for the past 15 years while its foreign exchange reserves has also declined in the past few years but were still above the level of the state`s foreign and short-term debts.
He said BI`s decision to raise its reference rate by 50 basis points to overcome rupiah depreciation had put the country`s economy in a relatively safe position away from global economic worries.
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