TEMPO.CO, Jakarta - The World Bank predicts that Indonesia`s economy will face 3 risks next year. The risks are slowing household consumption, weakening commodity prices, and global financial market turbulence.
World Bank Country Director for Indonesia, Rodrigo A. Chaves reminded the need to heed for household consumption decline as it will majorly affect state spending, given more than half of Indonesia's GDP is composed of household consumption.
Chaves said Indonesia should be wary of the decline in commodity prices next year. Although the government has diversified the economy in recent years, Indonesian still relies heavily on commodity sector.
"A fall in commodity prices could undermine the exchange rate and put pressure on state revenues," he said at the 2017 Indonesian Economic Quarterly event yesterday.
The third risk is the interest rate hike by the US central bank, which is predicted to trigger financial market turmoil. On Wednesday, Dec. 13, The Fed officially raised its benchmark interest rate by 0.25 percent to 1.25-1.50 percent.
"This turmoil could lead to sudden capital outflows from developing countries like Indonesia," Chaves remarked.
The World Bank previously predicted Indonesia's economy in 2018 to grow moderately. The GDP is projected to grow 5.3 percent, or 0.1 percent lower than the government's target set in the 2018 State Budget. The state revenue is pegged at Rp1,886 trillion, slightly lower than the government target of Rp1,895 trillion.
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