Universitas Gadjah Mada
Faculty of Economics and Business

Indonesia's economy nowadays is thought to be more tense by some economists. In "Economic Financial Review 2013 & Outlook 2014" (23/12/13), economists from Faculty of Economics and Business Universitas Gadjah Mada (FEB UGM) laid out how the state of the economy today and their prediction about Indonesian economy next year. Forecasting economic conditions will constitute one form of academic accountability that demonstrates their real contribution to the community.

Indonesia's economic growth suffered from deterioration throughout 2013. The slowdown of economic growth is caused by the weakening of the Rupiah exchange rate, the rise of BI rate, and high inflation. In addition, there is also an increase in macroeconomic instability, such as increased inflation, a plummeting Rupiah to Dollar, etc. The combination of High macroeconomics instability and falling economic growth can lead to unpleasant conditions, such as like rising unemployment. People will lose their jobs resulting in decreased welfare. Those were stated by Prof. Sri Adiningsih, Ph.D., Director of the Macroeconomics Dashboard FEB, regarding the description of the economy throughout the year 2013.

What about 2014? Will the State of the economy improve, or the opposite? According to GAMA Leading Economic Indicator, the economy of Indonesia in 2014 will experience high volatility. Moreover, that year is the year of the election. So the economic indicators could be influenced by political factors. Then, inflation will decrease in the range of 8 percent, though it still remains high. Meanwhile, the rupiah was predicted would still be weakened. Or it could be said that Indonesia's economy next year will decline again.

The same thing is likely to experience by the Indonesia’s financial sector. Indeks Harga Saham Gabungan (IHSG) will only move around 4000. Then, declining in trade will cause industry associated imports get pressure. Besides, the property and automotive sectors will drop. Bank credit growth will slow down. Those are delivered by I Wayan Nuka Lantara, Ph.D.

The forecast states that economic conditions in 2014 are not good, but the economists stated that they still hold hope for Indonesia. Implementation of a secure and peaceful election should be kept so it will not become a factor beyond the shake up of economic indicators. Next year could be the tough year for Indonesia.

Source: Nadia/FEB