Indonesia at the 2012 Central Economic Global Uncertainty

Entering the year 2012, Indonesia's economy still faces the risk of high global ketidakpastain despite Indonesia's economic performance in 2011 could be a great asset to enter the year 2012 mainly due to the strong support of the domestic market.

Global Challenges

Before him, during the year 2011, issue debt and budget deficit crisis is acute in Greece makes economic shocks, especially in global financial markets, including in Indonesia. Various attempts were made by the countries that joined the European Union (EU), and in particular the 15 countries using the euro currency, it did not work to restore investor confidence, pessimism and even strengthened the EU's crisis will take a long yangg.

The EU faces a serious fiscal problem with the budget deficit recorded an average of 6.4 percent of gross domestic product (GDP) and debt to GDP ratio by 80 percent. Not only sanctioned by the EU fiscal crisis, budget problems in the United States (U.S.) is also very acute. With a budget deficit of 1.3 trillion U.S. dollars, or about 8.6 percent of 2011 GDP forecast and the amount of government debt reached 15.6 billion U.S. dollars, or about 90 percent of GDP. Fiscal crisis makes the U.S. lose its highest ratings during the 70-year AAA to AA + last on August 3, 2011.

The recent development of the U.S. economy began to show improvement, especially with the improvement in consumer confidence and falling unemployment rate to 8.5 percent in December 2011. Expectations also arise from the EU in line with the spirit to carry out fiscal consolidation accompanied by the injection of liquidity in the form of loans from the European Central Bank (ECB) to banks in the EU with only 1 percent interest rate and tenor of 3 years.

ECB is rumored to still be increasing the number of loans up to 1 billion euros. Additional liquidity in sufficient quantities it also provides opportunities massive influx of EU funds into emerging markets of Asia, including Indonesia. Moreover, at the same time, Indonesia's economic conditions have domestic market forces are accompanied by an increase in purchasing power.

Domestic challenges

Indonesia became the demographic structure of the carrying capacity of the domestic market terrsebut. The population of the middle class category - according to the World Bank is a population with spending between 2 and 20 U.S. dollars per day - an increase by 50 million between the years 2003-2010.

In addition to demographic support, Indonesia recorded a solid macroeconomic performance strengthened. When the world economic growth has decreased to a negative (recession), along with China and India - Indonesia's economy to grow positively. The solid economic growth in 2010 reached 5.9 per cent yoy, yoy and 6.5 percent in 2011. At the same time, the inflation rate falls, foreign exchange reserves continued to grow through the over 100 billion dollars.

In addition, Indonesia's economy is also supported by a relatively stable financial system. Index registered lower financial stability. BI index calculation result of stabilization of 1.68 recorded in October 2011, down from 2.43 in the 2008 crisis. In financial markets, Indonesia has the potential to be excellent investments in 2012, especially on December 15, 2011 Fitch then assign ranks Indonesia in the category of investment.

Indonesia's economic challenges in 2012 actually came from the real sector in the country. Strong domestic market could be relocated while the domestic market. Surely Indonesia's domestic market is also the target market is mainly imported from Asian countries due to their trading partners in the EU weakened. Access to banking that is not quite easy with a costly mortgage interest, logistics costs are high due to limited connectivity and of course, inadequate infrastructure and an acute problem of corruption.

At the same time from 1 April next government will raise the electricity tariff (TDL) on average by 10 percent and would prohibit black plate car uses premium subsidy. According to the government, both components are expected to increase inflation by 0.8 percent. However, we estimate the total impact of an additional inflation to 2 percent. Expectation of rising inflation will make the expectation of rising interest rates. Those factors make domestic products less competitive compared to imported products, especially consumer goods.

Will Indonesia products can compete in the market itself amid the onslaught of the possibility of imported products are cheaper in the middle of existing constraints? The key is the government's credibility. Government plans to build a variety of infrastructure projects have been realized and the government needs to make a breakthrough in the short term policy.

It is time the government is also aggressive fiscal side, ensuring maximum absorption of the budget so that the role of government to encourage growth that could compensate for the possibility of slowing economic boost export earnings. The point is how to create a domestic market of Indonesia's economic strength amid the current global risks.