If you want economic growth of up to 7 percent, the investment-to-GDP ratio must be 47 percent

JAKARTA – Indonesian Employers Association (Apindo) Chairman Shinta Kamdani said Indonesia needs an investment ratio of 41 to 47 percent of GDP so that economic growth can reach 6 to 7 percent.

“If we want the economy to grow by 6-7 percent, then an investment ratio of 41-47 percent to GDP is needed,” he explained in the Midyear Challenges Indonesia Business Agenda 2024, Monday, July 29.

Shinta said Indonesia’s economic growth is currently still stagnant at around 5 percent through 2024. Meanwhile, the investment-to-GDP ratio was set at 29 percent by the end of 2023.

“This shows that we still have a lot of homework to do,” he said.

Shinta conveyed one of Indonesia’s investment problems, namely the incremental capital output ratio (ICER). According to him, Indonesia’s ICOR is still quite high, namely 6.8 percent, or not competitive with countries in the ASEAN region whose ICOR is in the range of 4 to 5 percent.

Shinta said that with the condition that ICOR is still high, it will hinder inward investment, so it will have an impact on Indonesia’s economic growth. This is because every 1 percent of economic growth requires an additional investment ratio of 6.8 percent of GDP.

For this reason, Shinta said Indonesia needs to increase efficiency in various universal operating costs, financing costs, compliance costs, as well as energy costs, electricity, labor and other costs.

On the other hand, Shinta said Indonesia also needs financial deepening, which is reflected in an increase in the scale of financing and an expansion of the distribution of corporate financing for business sectors that currently still need adequate corporate financing.

Earlier, President-elect Prabowo Subianto admitted that he had bet with several ministers from other countries on Indonesia’s economic growth, which could reach 8 percent during his leadership.

“If I am even more courageous. We must dare to set higher goals. If I am optimistic, we can achieve 8 percent growth. I bet with several ministers from a neighboring country,” he said at the launch of the Geoportal Policy One Map 2.0 White Paper One Map Policy Beyond 2024, Thursday, July 18.

But unfortunately, Prabowo would not reveal which country was betting on him. Prabowo said that if Indonesia’s economic growth reached 8 percent, the country’s ministers would treat him to dinner.

“I’m not going to name any country. But there are several ministers from one country who are betting on me. He said: Your Excellency, if you can achieve 8 percent growth, once, just once in the next five years, we will achieve 8 percent. They are going to offer me a dinner. They will offer me a dinner!” he said.

Tag: ekonomi apindo pertumbuhan ekonomi