JAKARTA, March 5 (Reuters):Indonesia's economy may grow more than 5.1% this year from the year before with the presidential election wrapped in one round in February, its central bank governor, Perry Warjiyo, said on Tuesday.
In remarks made at an investment forum, he said growth will come from exports, domestic consumption and investment. He also reiterated that the central bank sees room to lower interest rates in the second half of 2024.
Meanwhile, Indonesia's presumed president Prabowo Subianto on Tuesday promised a "very smooth" transfer of power later this year and opened the door to privatising state-run firms while maintaining government control of key economic sectors.
Speaking at an investment forum, Prabowo, who unofficial vote counts show won the Feb. 14 presidential election by a huge margin, also said he believed economic growth could reach 8% annually within the next four or five years.
Prabowo said that while the state could continue to regulate and maintain decision-making in strategic areas in Southeast Asia's biggest economy, the private sector should be allowed to thrive and take the leading role.
"Maybe we have to really have a programme of rationalising and privatising many of the state owned enterprises. The state can regulate, the state can (provide) oversight, the state must also have strategic decision-making in the strategic sectors," he said.
"I don't see for instance why we need to be present in every sector of the economy ... now we must allow private sectors to be more and more dominant."
State companies in sectors such as banking, telecommunication, construction and mining currently play a dominant role in Indonesia's economy.
Prabowo, 72, pledged to continue the policies of incumbent Joko Widodo, who has overseen a big push to modernise infrastructure, and said he aimed to significantly improve tax ratios by widening the tax base, not necessarily by raising taxes.
He said his government could widen the fiscal gap to up to 2.8% of gross domestic product, from under 2% in 2023, and would still comply with the mandatory deficit ceiling of 3% of GDP.
Investors have been closely watching Prabowo's fiscal plans, after previous comments on potentially upping Indonesia's debt-to-GDP ratio raised alarms. Rating agencies warn his signature promise of free school lunches could be costly.
Prabowo pledged to maintain Indonesia's track record of fiscal prudence, but repeated that he thought there was space to increase public spending and debt, with their ratios relative to GDP being lower than other countries.
Prabowo also said Indonesia would strive for food self-sufficiency, which he was optimistic could be achieved quickly, leading to the nation exporting food within four years.
He said Indonesia was open for investment and that his government would ensure protection for foreign and domestic investors. - Reuters
