The biggest economy in Southeast Asia struggles

Joko Widodo is being criticized by the international media for conducting a rather counter-intuitive extended growth policy

The biggest economy in Southeast Asia struggles

Indonesia is Southeastern Asia’s largest economy with a GDP of $940.953 billion dollars, its economy has risen an average of 5% during the last 4 years with 2017 being the strongest year yet. Nevertheless, 2017 had an important setback for the Asian economy as their trade balance hit negative numbers for the first time in 19 months.

The official data from the nation’s Central Statistical Agency showed that in July, exports rose to 41.12%, meaning 13.62 billion dollars, and its net imports jumped 54.02%, or 13.89 billion dollars. Worldwide markets show preoccupation as this economic outcome was not expected

Indonesia’s 123.7 million labor force bases its operations in the agricultural sector (32%), the industry sector (21%), and the services sector (6.3%). Recent years have been good for the Asian nation as the exports of cement, food, electrical appliances, rubber, textiles, and textiles have increased; from the local government’s perspective, growth comes with the creation of millions of jobs in these areas.

The state exports crude and gas, as well, and it is precisely in this industry where the issue of trade deficit came alive; Indonesia is going under a quick growth situation, which implies that large quantities of resources are needed. When the country’s economy became inclusive and open, it boosted jobs, but sustained growth implies technical work.

The Commonwealth's President, Joko Widodo is being criticized by the international media for conducting a rather counter-intuitive extended growth policy.  Now that the average citizen has a greater chance of making a living and, thusly, boosting economy; systematic growth must be led. Following the world’s Keynesian trend, infrastructure is being pursued.

Infrastructure requires oil and gas to be carried on, at the same time, the government is shrinking the investments for exploration from 1.3 billion dollars to 100 million dollars in 2016. This forces the nation to buy a product they could produce on their own, thusly creating a 600-million-dollar deficit in said trade, which is reflected in the 271.2-million-dollar trade discrepancy back in July.

It is understandable that the developing nation has accepted that Oil and Gas is a declining industry, and are making a very brave move forward to reduce their crude industry from 6% to 3% in the last half of a decade. Still, every economic decision requires an appropriate timing so a backlash won’t occur. This time, seems as if the southeastern nation was too quick to implement and ended up hurting itself.

 

Latin American Post | David Eduardo Rodríguez 

Copy edited by Susana Cicchetto

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