The Indonesian economy underwent 2.07 percent contraction in 2020. For this year’s growth according to its target, plenty of room and opportunities are in store.
By
KOMPAS EDITOR
·3 minutes read
The Indonesian economy underwent 2.07 percent contraction in 2020. For this year’s growth according to its target, plenty of room and opportunities are in store.
Despite the negative growth, based on data of Statistics Indonesia (BPS) last week, there was economic improvement with the gradually decreasing contraction from 5.32 percent negative in quarter II-2020 to 2.19 percent negative in the fourth quarter. Indonesia still has ample room for growth in line with the target of 4-5.2 percent because not all sources of growth have yet been optimally exploited. Indonesia possesses favorable initial capital, made up of monetary stability and the low 2020 inflation rate of 1.68 percent.
The sources of economic growth are domestic and foreign direct investments, which will generate production with value added, open quality employment, promote consumption that reduces imports, boost exports that turn out foreign exchange and create no negative externalities.
The growth of investment realization in 2020 was 3.1 percent amid the pandemic. However, this investment can still be increased because in 2017 investment realization reached 16.4 percent. The Job Creation Law has relaxed various direct investment requirements so that investment realization is expected to be jacked up by observing the principles of sustainability and national interests.
Our exports grew negatively by 7.7 percent but imports were 14.71 percent negative. Commodities continued to be export contributors, which were crude palm oil and minerals comprising tin, iron ore and copper. We cannot rely on commodity exports in view of the presence of cycles of commodity prices like those occurring in 2014. There’s no other choice except the constant promotion of industries manufacturing value added products.
We have plenty room for growth through innovation and utilization of digital technology in health, agriculture, finance, trade and manufacture, which are domestically developed. This situation is different from advanced countries whose economy doesn’t grow rapidly despite their initiation of innovation as well as information and communication technology. Research and innovation should continuously be undertaken in areas where Indonesia has comparative advantage, such as the sector of food and tropical agriculture, so as not to be taken over by other countries now getting on with their research.
Entering 2021, we hope the government will set more clear-cut targets. Incentives for micro, small and medium-scale enterprises (MSMEs) will have a multiplier effect if they are designed for the labor-intensive sector, targeting women in ultra-micro, micro, small and medium-scale businesses whose products are exported. Apart from opening employment, the foreign exchange they earn will be invested at home.