The sharp fall in the euro and the ongoing crisis in the euro zone should be a great cause of concern for policy makers in Indonesia. We cannot afford to be complacent and take for granted that the economy will continue to expand at the pace it has for the past few years.
Europe’s ongoing crisis is proof that the global crisis is far from over. Experts worry that things will get worse before they get better. With the worsening situation, volatility in the financial markets will be the norm. It is possible that the euro might weaken further, which means that global markets will be further impacted. With Portugal and Greece already technically bankrupt and with Spain and Italy facing a ballooning budget deficit, Europe’s problems do not have a short term solution.
It just goes to show the world is going to face slow growth for a very long time. This will impact everyone globally, Indonesia included. No economy and no country is immune to the worsening global uncertainty. Even powerhouse economies such as China and India have already seen sharp contractions. This means that we have to get our act together fast. The markets will not be forgiving under such conditions and will penalize us when we are not making progress. And in the last six months, there is a sense we have not made much ground on several critical fronts.
While the country’s fiscal balance remains healthy, progress on infrastructure development — in particular transportation — bureaucratic reforms, eliminating fuel subsidies and a host of other issues are yet to be resolved. Indonesia has seen strong growth in the past three years. This has helped to reduce poverty and raise living standards. The country has received kudos and earned ratings upgrades from several ratings agencies. All this is at risk if we do not push on and carry out the more challenging tasks that face us.