The International Monetary Fund (IMF) recently released Consultation Report Article IV for Indonesia 2017, or Indonesia: 2017 Article IV Consultation. This report contains the results of the IMF’s assessment of the Indonesian economy. The executive directors praised the Indonesian authorities for having managed to record good economic performance. These include stable growth of the economy, moderate inflation, and sustained current account deficits. Indonesia’s economic outlook is also quite good. However, IMF executive directors encourage Indonesia to be alert to a number of risks, including fluctuations in capital flows. “The directors assert that achieving growth potential can help create employment opportunities for a growing young workforce,” the IMF said in a report on Wednesday (7/2/2018).
In addition, the IMF also encourages Indonesia to continue the structural and fiscal reforms that mobilize state revenues to finance development spending and support structural reforms in productivity, labor and financial markets. The IMF directors also welcomed Indonesia’s focus on short-term policy mix to support growth while maintaining stability. The fiscal adjustment of 20q8 should gradually protect growth, while re-establishing fiscal bearings. The IMF also views the current direction of Indonesia’s monetary policy to target price stability and support growth. IMF recommends Indonesia to increase monetary policy transmission. “The directors welcomed the commitment of the authorities (Bank Indonesia) to maintain exchange rate flexibility and restrict foreign exchange interventions to prevent irregular market conditions,” the IMF said. The IMF recommends that Indonesia immediately implement its medium-term acceptance strategy. The goal is to tackle priority spending programs that can promote economic growth and structural reforms, including reducing dependence on foreign financing. This strategy should include frontload tax policies and administrative reform. Short-term measures to prevent the fall of the tax ratio should also be considered by Indonesia.