The easing of global monetary policy, interest rate cuts by the United States Central Bank and Bank Indonesia have created optimism amidst the sluggish global economy.
BCA Group Chief Economist, David Sumual, said that cutting interest rates could encourage investment as a catalyst for economic growth.
David believes that Indonesia needs investment from outside to achieve economic growth of 8% during the Prabowo Subianto-Gibran Rakabuming Raka government era. This target cannot be achieved if we only rely on domestic investment.
“If we rely on domestic savings, we will only grow around 5 percent. But if we want to reach 8% we need even greater external investment,” he said in a discussion entitled ‘Navigating Business Strategy After the Lowering of Reference Interest Rates and the Destruction of Class Intermediate’ at the Sultan Hotel, Jakarta, Friday (27/9).
According to his calculations, if you want to achieve 8% economic growth, you need an investment of up to US$ 650 billion. Meanwhile, currently the investment value is around US$120 billion.
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Another work that is needed is to improve the Incremental Capital Output Ratio (ICOR) figure which is quite high due to the high investment costs in the country.
“Compared to neighboring countries, it is 3-4%, ours is around 5.6%,” he stressed.
On the same occasion, the Indonesian Retail Entrepreneurs Association (Aprindo) asked the government to postpone the increase in Value Added Tax (VAT) from 11% to 12% next year.
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The reason is, the number of middle class people in Indonesia is decreasing. Right now, said Aprindo Chairman Roy Mandey, several goods have experienced price increases. He is worried that the increase in VAT, even if it is only 1%, will make people eat up more of their savings.
“The 1% VAT increase is not a 1% price increase, but 10x the 11% increase, it will definitely increase even though it is only a 1% increase in the written VAT figures,” he explained.
Meanwhile, Deputy General Chairperson of the Indonesian Real Estate DPP (REI) Hari Ganie proposed that the government’s discourse on establishing a Ministry of Housing be focused on urban areas. This is because the majority of people in urban areas cannot yet own a house.
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He hopes that the formation of the Ministry of Housing, Hari Ganie hopes that housing matters can be more focused, especially regarding budget issues. While joining the PUPR Ministry.
Hari also suggested that the construction of 1 million houses in urban areas be focused on 10 metropolitan cities. (M-4)
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