Jokowi Seeks to Break ‘Middle-Income’ Status Trapping Indonesia

(Bloomberg) -- Indonesian President Joko Widodo, facing re-election next year, called for a deepening of reforms for the nation to escape the “middle-income trap” as the $1 trillion economy fends off an emerging-market rout.

While a growth rate of about 5 percent and low inflation were commendable amid the global uncertainty, the country needs to increase its economic competitiveness, Widodo, known as Jokowi, said in his annual address to the nation on Thursday.

“We must not be trapped in a status of a middle-income country,” Jokowi said. “We must succeed in becoming a developed country.”

The World Bank has said that Indonesia’s economy would need to grow faster than 5 percent to escape the so-called “middle-income trap”, the phenomenon in which countries fail to evolve into high-income nations. Under Jokowi, economic growth has averaged about 5 percent a year, far below the 7 percent he envisioned when he took office in 2014.

Jokowi pledged to accelerate infrastructure projects and boost skills of workers, as part of the roadmap for Industry Revolution 4.0. The president is scheduled to present the 2019 budget to parliament this afternoon, where he will outline his spending priorities.

Click to read: What to Watch in Jokowi’s Last Budget Before Indonesia Elections

The growth recovery is offering some support to the president with the economy posting its best growth since 2013 last quarter. But that is now threatened by the market rout with the currency among the hardest hit in Asia, losing 7 percent against the dollar this year.

Some of Jokowi’s success include low unemployment rate, a massive infrastructure program, higher investments and sovereign rating upgrades.

“With a conducive ecosystem, we will be able to strengthen macroeconomic stability and improve the quality of growth and ensure economic justice,” Jokowi said.

The president is pitted against Prabowo Subianto in a rematch of the 2014 elections and his opponent has wasted little time in criticizing him for failing to meet the growth target and defend the rupiah. Jokowi said the stable growth rate and benign inflation “makes economic growth more meaningful.”

--With assistance from Yoga Rusmana.

To contact the reporters on this story: Tassia Sipahutar in Jakarta at ssipahutar@bloomberg.net;Viriya Singgih in Jakarta at vsinggih@bloomberg.net;Eko Listiyorini in Jakarta at elistiyorini@bloomberg.net

To contact the editors responsible for this story: Nasreen Seria at nseria@bloomberg.net, Thomas Kutty Abraham, Karl Lester M. Yap

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