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Next stimulus needs to boost consumption
Jakarta Post - November 26, 2015
They added that the government needed to also boost the demand side if it were to issue another package.
Paramadina University rector Firmanzah said the six economic stimulus packages issued by the government had helped improve the psychological well-being of business owners and market players amid the weak economy.
"The economic policy packages serve as the government's signal that it stands together with the market to improve the economy, with the Indonesian Chamber of Commerce and Industry [Kadin] and the Indonesian Employers Association [Apindo] also being involved in the stimulus arrangements," Firmanzah said on Wednesday.
On the other hand, Firmanzah, who is also a professor of economics in the University of Indonesia, said the government should evaluate the previous packages to determine which ones were successful and to repair any failures.
He said an assessment of the outcome of those policy packages would ensure an upcoming policy would be of better quality. The government, he added, needs to repair the bureaucratic problems at or between ministries that have hampered implementation of those incentives.
Once the evaluation is finished, Firmanzah said the government should start to prepare a stimulus that will boost people's purchasing power and consumption, considering that previous packages focused on the supply or production side.
A boost on the demand side would be essential to help the government reach its economic growth target of 5.3 percent next year as consumption contributed more than 50 percent to the country's total gross domestic product (GDP), he said.
"I think a raise of non-taxable income [PTKP] and a longer delay on electricity fee hikes for household are necessary, because consumption is our engine of growth and we should avoid making policies that negatively affect purchasing power," he said.
President Joko "Jokowi" Widodo has decided to delay an electricity fee increase that was planned for January next year, with Energy and Mineral Resources Minister Sudirman Said saying that the price hike would not be applied at least until June next year as a pre-review was needed.
Rangga Cipta, an economist at Samuel Sekuritas, expressed the similar view that a delay on raising electricity rates would be essential in helping to maintain people's purchasing power, while he also suggested that the next policy package should start focusing on the demand side.
"Most of the packages issued previously were more focused on improving the supply side, which was good, but that might only take effect in the long term," Rangga said.
According to Rangga, the effort to improve the supply side is more like "cleaning a gutter full of trash, while there is no significant flow of water," as investment and exports grew sluggish amid weak consumption.
"The government should give a push from the demand side, such as by providing subsidies or a cut of income tax, if it wants to avoid rising unemployment," he said.
Year-on-year (yoy) GDP growth in Southeast Asia's largest economy stood at 4.73 percent in the July to September period, a slight increase from the 4.67 percent yoy growth posted in the previous quarter. It is, however, still lower than the 4.92 percent yoy growth booked in the same period of 2014.
Source: http://www.thejakartapost.com/news/2015/11/26/next-stimulus-needs-boost-consumption.html.
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