Macro-Economic Policies Consolidation

Macro-Economic Policies Consolidation for National Economic Security In The Mitigating Circumstances of The Global Down-Turn

By Gadis Ranty
The World Economic Outlook published by the International Monetary Funds and East Asia & Pacific Update (topic: “East Asia: Testing Times Ahead), published by the World Bank, in April 2008 had unfolded the East Asia and the world economic preview for year 2008 and 2009. They stressed that the whole world will undergo the economic slowdown for these two years.

According to the Bappenas (National Development Planning Board) analysis publication on May 27, 2008, during 2008-2009, the world economic growth will wane from 4,9 % in 2007 to 3,7 % in 2009. The whole world will follow the US economic slowdown (due to the subprime mortgage crisis), from 2,2 % in 2007 to 0,5 % in 2008, and 0,6 % in 2009. This economic slowdown will affect either the developed countries or the East Asia developing countries.

These past few years and the last one was in 2001, the US economic slowdown generally followed even by the worst slowdown in the rest of the world. However, for 2009, the US economic slowdown purportedly would not turn the severe impact within the East Asian developing countries economies. If the US economy tumbles from 2,2 % in 2007, to 0,5 % in 2008 (descended 77 % from the past years), in the same period, the East Asia developing countries will experience slowdown for only 15,7 %. Consecutively, Indonesia economy and Korea economy will be suffered slowdown by 4,8 % and by 6,1 %. Meanwhile, Thailand economy will otherwise increase by 4,2 %.

Based on The World Bank publication, there are several reasons behind the leverage of East Asian developing countries economic securities. First, the East Asian countries underlying trend is higher 4-5 % than developed countries trend. Hence, whenever there is any economic growth fluctuation among the industrial countries (e.g. the US economic slowdown in the early of 2008), the fluctuation happened inside the East Asian region would not diverge from the trend. The trend is going to ease the economic shocks towards the region. Second, in the prior US recession in 2001, caused by the burst of growth “bubble” in “high-tech” sector, the fall of US import incited incommensurate US import from other countries. Notwithstanding, as stated in the World Bank report, the development data of 2008-2009 indicated no significant on East Asian countries import decrease, as happened in 2001. Third, unlike the 2001 crisis, and the years before, after the China and Middle-East countries had emerged as the new economic forces, the level of trade dependency on US recoiled from 34 % in 1999 to 29 % in 2006.

Learning of how strong are the East Asian developing countries withstanding the cyclus economic tremors from the developed countries, Indonesia could start to consolidate its macro-economic policies (fiscal policies, monetary policies and its payment balances). The term of consolidation was implied from the “Leader-Follower” model--suggested by Miranda S. Goeltom, as cited by Mudrajad Kuncoro (2008) . The point is, the coordination has to refer to the sequence of the policies actions. An authority has to issue the policies which are compatible with the external environmental challenges. Next, these policies shall be responded by the other policy makers. Whenever the oil price soars, the fiscal authorities need to adjust the government expenditure policies immediately, while the monetary authorities need to be the follower by setting the monetary policies which not disrupt the macro-economic stability. The monetary authorities in other case (the currency crisis), could undertake the leader position by direct intervention in the obligation and the foreign currency markets while the fiscal authorities become the follower by countenancing the safety net to diminish the serious serial effects of financial systemic risk.

Not only the policy mix on the macro level, the policies coordination on the metaeconomy level shall be conducted as well. The meta environment comprises the anticipation of the natural disruption in the sectoral and in the regional scale. Integrating the farming policies, industries and national energy to optimize the whole capabilities that we have, for warranting the food and energy security.

Indonesia needs to prioritize bridging the national economic development gap (by supporting the most impoverished areas and strengthening the partnership between the areas). The simultaneous movement of the planned economy towards the market economy (through the market liberalization for foreign direct investments)--oriented to boost the export flows; and focused in the education and health management development and real economy rescues for the poverty reduction. In addition, the saving culture could be a recourse for capital and education accumulation for the youth generation. As we can see from China, the saving is a domestic investment prerequirement that become the crucial factor for the economic growth.