Senior Economist Boediono noted that the global economic conditions were still prone to crisis due to existing uncertainties, with an unpredictable trend.
"The world economy is still prone to instability and crisis," Boediono stated at a discussion forum "Winning in a Turbulent Economy" in Jakarta on Wednesday (Nov 28).
The crisis could arise anytime, and no one could predict its intensity. No single country as yet has an effective method to overcome the problem. Hence, Boediono, who was the vice president during the 2009-2014 period, believes that efforts to strengthen the domestic economy should continue to be made in the face of uncertainties.
This can be carried out through reinforcing coordination among the fiscal and monetary authorities as well as through continuous implementation of structural reforms.
"We have institutions that can coordinate well for monetary and structural reforms. This can reduce the risk of instability or the economic crisis," Boediono remarked.
In the meantime, economic observer Agustinus Prasetyantoko of the Atma Jaya Catholic University has forecast that the Indonesian economy next year would grow at 5.1 percent only, quite similar to the estimated growth this year due to protracted global economic uncertainties that affected the domestic economy.
The government is most likely to fail in achieving its economic target of 5.4 percent as assumed in the 2018 state budget.
"Indonesia`s economy next year will not be as fast as expected. Next year, it will be 5.1 percent, and this year, it will also be 5.1 percent," Prasetyantoko stated recently.
Normalization of the US monetary policy as well as the increased US economic growth, which has caused the widening of the fiscal deficit in that country, has become a threat to the global economy, especially for developing countries.
The estimate is the same as the International Monetary Fund`s (IMF`s) forecast of Indonesia`s economic growth at 5.1 percent in 2018 and 2019.
Finance Minister Sri Mulyani Indrawati has also forecast economic growth this year in the range of 5.14 percent to 5.21 percent.
This projection is far lower than the earlier assumption of the 2018 State Budget at 5.4 percent, whereas in the 2019 state budget (APBN 2019), economic growth is targeted at 5.3 percent.
However, Bank Indonesia, the central bank, has forecast that the country`s economy would grow stronger in 2019 than this year`s estimated growth of 5.1 percent.
Governor of the Central Bank Perry Warjiyo said the instrument of benchmark interest in 2019 will be used to maintain economic stability, with parameters of exchange rate and inflation.
He said the economy can still grow 5.2 percent year-on-year in 2019.
"The economic growth has been set in a range of 5-5.4 percent, with the middle point at 5.2 percent. However, it could be between 5.3 percent and 5.4 percent," Warjiyo stated.
Yet, Bank Indonesia Deputy Governor Dody Budi Waluyo confirmed the decline in the projection of economic growth in 2019, from the previous range of 5.1-5.5 percent.
"We ensure to cut off the outlook for 2019 to a lower range," he stated.
The global economic uncertainties were also expressed by President Joko Widodo (Jokowi), who said uncertainty besetting the global economy is feared to continue through 2019.
"The global economy at present can potentially be hit by uncertainty," President Jokowi remarked at a national leadership meeting of the Indonesian Chamber of Commerce and Industry (Kadin) in Solo, Central Java, on Wednesday (Nov 28).
He said the recent summit meeting of the Asia Pacific Economic Cooperation (APEC) had showed that there were no signs of a possible end to the trade war between the United States and China.
However, Jokowi said, the trade war also opens new opportunity
"According to Kadin, many foreign investors planned to relocate their factories to ASEAN, including Indonesia," he stated.
What is important for the country is to continue making efforts to utilize opportunities and to take steps in the face of global uncertainties. Most importantly, Indonesia has demonstrated its resilience in the face of an economic crisis.
According to Boediono, who is also the professor of Gajah Mada University, Faculty of Economy, Indonesia was able to withstand the crisis several times due to the existence of appropriate mitigation policies.
He even recounted the rescue efforts made by the government to secure Bank Century in 2008 to maintain public confidence in the banking system.
"In our view, the situation at that time was quite serious and needed to be addressed. We had one though on not to let the economy fall further, because, otherwise, the economic costs will be huge," he added.
Boediono admitted to not pondering over the political risks during decision-making, as the policy was taken based on economic considerations.
"We have never thought of the political risk, as the economic practices and the best policies that we take are the best. Hence, it was the only option. If banks are at risk, do not shut them down at that time," he pointed out.
Editing by Fardah
Reporter: Andi Abdussalam
Editor: Andi Abdussalam
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