Indonesia: Growth needs a push – BNP Paribas

In 2019, Indonesian economic growth decelerated slightly to 5%. A path of growth close to its potential but still insufficient to increase significantly its GDP per capita. Without large structural reforms, Indonesia will grow old before it gets rich, Johanna Melka from BNP Paribas informs. USD/IDR trades at 13814.90.

Key quotes

“Over the past five years, Indonesia has confirmed its ability to withstand international shocks. Its growth has remained solid and its macroeconomic fundamentals have remained robust.”

“Behind these good results lies a more nuanced reality. The main structural constraints on growth are:

– The concentration of employment in agriculture

– The low level of education of the population in spite of the increase in expenditure

– The low share of women in the labour force

– Major infrastructure needs

– Institutional constraints.”

“Several laws will be presented to parliament during the year 2020. The ‘Omnibus law on job creation’ is the most controversial of these. By relaxing the rules governing the Indonesian labour market, it could help to attract more foreign direct investment.”