Indonesia will not change its rhetoric to take a more inward-looking strategy to navigate the rising sentiment of protectionism driven by the US, according to Sri Mulyani Indrawati, the country’s minister of finance.
Speaking exclusively to GlobalMarkets, Indrawati was adamant that Indonesia, which has enjoyed the perks of global trade over the past decade, had a “strong interest” in ensuring co-operation among countries to protect trade practices.
“Indonesia will stand ready to work with other countries to make sure the world is going to be a place for many countries to be able to do economic exchange, including free trade and investment, that will benefit people.”
But she also admitted that a shift had taken place, putting the idea of multilateralism into much sharper focus. She said that multilateral institutions such as the International Monetary Fund and World Bank needed to work harder to make their added value clear to shareholders.
“Many technocrats need to work less exclusively and more inclusively, with less ivory tower mentality, but look at people in general and engage with them. As policymakers, we need to see policies that are credible and in people’s best interest. In the past, it seemed like support for multilaterals will continue to exist and be strong, but that is no longer the case. Now is an important time for them.”
ECONOMIC STRENGTH
Indrawati said the Indonesia economy would remain resilient to the pressures on the Indonesian rupiah and weather the storm wreaking emerging markets.
She set out what she said were clear examples of Indonesia’s strength in turbulent times. First was the inflation number of around 2.2%, which has remained stable amid a steady depreciation of the local currency this year. Second was economic growth. Indonesia posted 5.17% in the first quarter and 5.27% in the second, with the momentum expected to continue for the rest of the financial year.
“This is still among the highest levels we have seen in the past four years,” she said. “This, combined with the stability around inflation, shows that the Indonesian economy is quite resilient.”
Indrawati also cited the example of Indonesia’s deficit of 1% of GDP, and its positive primary balance surplus. “This is in stark difference to our position in September last year when the deficit was more than 2% and our primary balance was in a very deep negative zone,” she said. “Even on the fiscal side, we are doing a consolidation that is very ambitious, showing our resilience and our flexibility to respond to the changing global environment.”
That is unlikely to change, despite a number of geopolitical and macro headwinds buffeting emerging markets around the world. Trade tensions between the US and China, a strong US dollar putting pressure on emerging market currencies, and a US Federal Reserve that is on course with its rate hike strategy are all challenges facing Indonesia.