JAKARTA: Indonesia’s weakening currency is a good thing as it will spur the government to accelerate reforms to bolster the economy, according to Thomas Lembong, chairman of the Investment Coordinating Board.
The government will soon outline measures to open up the economy to more foreign investment, Lembong said at the “Bloomberg Modern Markets” conference in Bali, declining to elaborate ahead of the official announcement.
“I’m looking forward to a few breakthroughs, a few reforms that open up the economy further, even before the election,” Lembong said on Thursday. “And I can assure you that discussions are already in place in President Jokowi’s team about what we’d do in the second term.”
President Joko Widodo, who is seeking a second term in April, has adopted a raft of measures to rein in the current-account deficit, which has left the nation vulnerable to the emerging-market selloff. Indonesia’s economy is one of the hardest hit in Asia, with the currency slumping about 11% against the dollar this year.
“Very few countries or very few societies in the world are able to do reform preventively or pre-emptively,” Lembong said. “So, one upside that I see from the current market turmoil and currency pressure is, I think this is going to trigger a fresh way of reforms.”
“In Indonesia, we have this old saying that I will never get tired of, which is ‘good times leads to bad policies, bad times leads to good policies’. This is probably true, not only for Indonesia, but for a lot of countries,” Lembong said.
Under Widodo, known as Jokowi, economic growth has averaged about 5% a year, below the 7% he promised when he took office in 2014. Jokowi is pitted against the former Suharto-era general Prabowo Subianto, in a re-run of the last race.
“In the second term, there will be no time to waste,” Lembong said. “You’d want to hit the ground and running.”
The president has focused on ensuring financial stability by raising taxes on some imports, delaying billions of dollars of power and infrastructure projects and promoting the use of biodiesel to cut reliance on imported fossil fuel.
Those policies have supported steps taken by the central bank, which raised rates five times since May and drained billions of dollars from its foreign-exchange reserves to protect the currency.
Bank Indonesia will continue to be ahead of the curve in its monetary policy approach and accords priority to financial stability, Senior Deputy Governor Mirza Adityaswara said at the same conference.