JakartaPost-Oct 29, 2024
Indonesia could face an overheating economy if President Prabowo Subianto goes ahead with his plan to push the country’s gross domestic product growth to 8 percent per year, analysts have warned, suggesting that the archipelago does not have enough capacity to handle that surge in output, which would come with consequences. An overheating economy, which means GDP is growing at an unsustainable rate, could lead to rising inflation and unemployment. For now, many believe that Indonesia can only grow at around 5 percent annually, a figure that better reflects its current short-term domestic capacity. Private lender BCA chief economist David Sumual said that pushing for 8 percent GDP growth “is like forcing a car to go 150 kilometers per hour when the car was only designed to reach 100 kph”, stressing that the vehicle will overheat and eventually break down. David told The Jakarta Post on Tuesday that pursuing the target may involve providing a range of aggressive fiscal stimuli or issuing more debts, which could be unsustainable in the long run. One sustainable way to pursue high GDP growth is to reel in more foreign direct investment (FDI), he said. To attain 8 percent GDP growth annually within the next five years, the government would need to ramp up FDI by fivefold from the current realization, he said, adding that without it, growth would stagnate at about 5 percent. Last year, the country attracted Rp 744 trillion (US$47.19 billion) in FDI, an increase of 13.7 percent from the previous year, according to Investment Coordinating Board (BKPM) data. Read more at:
