The global economy started to show signs of recovery in 2017, driven by emerging economic growth in the United States, Europe and China. The volume of the world’s trade and commodity prices increased significantly, mainly because China began to increase imports
The impact of higher demand for non-oil and gas commodities boosted Indonesia’s export performance. Cumulatively, the value of Indonesian exports in 2017 reached USD168.73 billion, up by 16.2% compared to 2016. The increase in exports mainly came from the rising value and volume of non-oil exports, such as palm oil (CPO) and coal.
The recovery of the global economy also had a positive impact on the domestic economy. The Central Bureau of Statistics (BPS) announced that Indonesia’s economic growth in 2017 reached 5.07%, slightly higher than the 5.03% growth rate recorded in 2016. Whilst only a small year-on-year increase, it highlighted that Indonesia’s economy is on the path to recovery. The financial system also benefited from the stabilization of key macroeconomic indicators.
According to a survey conducted by Bank Indonesia (BI) in December 2017, the consumer confidence index (IKK) was 126.4, up from 122.1 in the November 2017 survey. Higher consumer confidence was driven by improved consumer perceptions of current economic conditions as well as their expectations of future economic conditions.
The Jakarta Composite Index (IHSG) at the close of 2017 trading on the Indonesia Stock Exchange (IDX) also gave an optimistic picture. IHSG closed at 6,355.654, up 20% since the beginning of the year, reinforcing an optimistic outlook that investor confidence in Indonesia’s economic climate is improving.
The world’s perception of the Indonesian economy has also improved, as reflected by the investments grade awarded by three leading credit rating agencies in the global investment sector, namely; Fitch, Standard & Poor’s, and Moody’s Investors Services. On December 20, 2017, Fitch upgraded Indonesia’s rating to a stable outlook (BBB), which was the highest grade for Indonesia since 1995.
Economic improvement was a result of the efforts made by the government to stimulate growth. Massive infrastructure development has led to improved performance in other sectors, although the full impact has yet to take effect within the short time frame to date. Government spending on infrastructure has also driven up private investment and household consumption growth. In this way, economic policy packages issued by the government have triggered investment acceleration and overall economic movement.
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