Apindo Reveals Why Indonesia's Economy Is Stuck At 5 Percent

JAKARTA - The Indonesian Employers' Association (Apindo) revealed that Indonesia's economic condition is currently stuck at the 5 percent level due to the achievement of the High Incremental Capital Output Ratio (ICOR).

Chairman of the Indonesian Employers' Association (Apindo) Shinta Kamdani said that currently Indonesia's ICOR is still too high at 6.8.

This means that every 1 percent of economic growth requires an additional investment ratio to GDP of 6.8 percent or not competitive with the country in the Asean Region.

"RI's economic growth is currently stagnant in the range of 5 percent with an investment ratio of GDP at the end of 2023 at 29 percent. So our homework is still long," he told reporters, Monday, July 29.

Shinta explained, in general, Indonesia's investment conditions are not optimal with the high level of ICOR.

In fact, he continued, investment is one of the main drivers of economic growth.

This causes Indonesia to be less competitive with other countries.

"So if you look at countries in ASEAN, they have a lower ICOR of 4 percent to 5 percent. For that we need to increase efficiency and at universal business costs, cost of finance, cost of compliance, as well as energy costs, electricity, labor and others," he explained.

On the other hand, Shinta said, Indonesia also needs financial deepening, which is marked by an increase in the scale of financing and expansion of distribution from business financing for business sectors which currently still require adequate business financing.

Shinta said that currently the total number of savings or gross savings is only 37 percent of GDP and the total capital market capital capital capital capital capital is only 49 percent of GDP.

"If we want [economics to] grow 6 percent - 7 percent, then an investment ratio to GDP is needed between 41 percent - 47 percent," he concluded.