JAKARTA: Indonesia could lift its pace of economic growth to an average of 6 per cent annually during President Joko Widodo’s second term in office, if it can attract more investment under the best-case scenario put forward by the country’s planning ministry.
Widodo is due to approve the proposal, which was made public on Wednesday (Jul 24) in a consultation forum with regional governments, when he starts his next five-year term on Oct 20.
The planning ministry presented three scenarios in growth forecasts up until 2024, with the most pessimistic seeing average GDP growth of 5.4 per cent a year, a middle scenario of 5.7 per cent and the most optimistic 6 per cent.
All would represent an acceleration from the roughly 5 per cent growth rate that Southeast Asia‘s largest economy has been stuck at in the last few years. The economy has been held back by depressed prices of commodities and higher interest rates aimed at discouraging capital outflows.
The new forecast assumes Indonesia will attract total direct investment of between 36,595.6 trillion rupiah to 37,447.6 trillion rupiah (US$2.62 trillion to US$2.68 trillion) in the next five years, or 6.9 per cent to 8.1 per cent investment growth per year.
“However, our supply capacity is estimated at only 3.46 per cent of GDP, so there is a significant gap in infrastructure financing,” according to the document, which says alternative funding methods such as public-private partnership would be needed.
According to the planning ministry, the government will focus on investment in basic infrastructure, such as piped water, access to electricity and building information technology infrastructure to boost broadband and cellular Internet spe.
Other projects include a high-speed railway from Jakarta to the Central Java city of Semarang, as well as the completion of the Jakarta-Bandung high-speed track, a US$6 billion project being build as part of China‘s Belt and Road Initiative that is due to start operations in 2021.
The planning ministry has previously said Widodo’s plan to move out of Jakarta may require investment of up to US$33 billion. If everything went to plan, the first stage of relocation will take place at the end of Widodo’s term in 2024, Minister Bambang Brodjonegoro has said.