Boosting Economic Activity in Indonesia: Stimulus Package to See Daylight this Month
The government of Indonesia is still busy preparing the policy package that was announced last week by Chief Economics Minister Darmin Nasution. Earlier it was reported that this stimulus package, expected to be finalized this month, involves deregulation and tax holidays designed to boost economic activity in Indonesia as well as to attract foreign currency inflows. The government will also look at how it can provide incentives to accelerate smelter development in Southeast Asia’s largest economy.
The economy of Indonesia has been plagued by slowing domestic consumption, sluggish global economic growth (particularly China’s downturn is a cause for alarm) and low commodity prices. As a result, the nation’s economic growth slowed to a six-year low of 4.67 percent (y/y) in the second quarter of 2015. Full-year growth in 2015 is likely to come below 5 percent (y/y).
During a cabinet meeting today (02/09) Indonesian President Joko Widodo said Indonesia needs massive deregulation in manufacturing, trade and agriculture to improve the country’s investment climate and attract (foreign and domestic) investment. Widodo added pressures on his cabinet by saying that the introduction of “massive deregulation and new regulations that create a conducive climate for the economy need to be carried out as soon as possible because we are racing against time.”
Over the next few days, President Widodo and his cabinet ministers will review a total of 160 regulations that have been identified as obstacles to investment in Indonesia.
Reportedly, the stimulus package also includes tax holidays as well as a new import policy for beef. Earlier this year beef prices had spiked markedly after the government reduced the quota for cattle imports from Australia.