World Bank calls on new governments to deliver policy stability for Economy

The Importance of Policy Clarity for Sustainable Economic Growth in Uncertain Times: Insights from the World Bank on Indonesia and Other Emerging Economies

The World Bank is urging countries, including Indonesia, to prioritize policy clarity for businesses as a means of driving economic growth amid global uncertainty and limited fiscal and monetary measures. Manuela Ferro, the Vice President of the World Bank East Asia and Pacific, emphasized the importance of addressing policy uncertainty, especially given the upcoming changes in leadership in many countries.

Ferro highlighted the challenges of providing fiscal or monetary stimulus to sustain long-term growth and underscored the significance of businesses having clarity about the investment regime in which they operate. She noted that implementing competition-enhancing policies would attract more investors into economic activities. The upcoming elections in many countries, including Indonesia, will have a significant impact on policy direction and economic growth.

In Indonesia, Prabowo Subianto was announced as the winner of recent polls and will be sworn in this October along with his running mate Gibran Rakabuming Raka, the eldest son of incumbent President Joko “Jokowi” Widodo. The IMF has warned countries about escalating fiscal risks such as tight financing conditions and growing debt vulnerabilities. It is crucial for countries to proactively manage these risks to ensure sustainable economic growth.

According to Ferro, policy clarity is crucial for businesses to make informed decisions about their investments. In an uncertain environment where there are no clear signals about government policies, businesses may hesitate to invest or expand their operations. However, if policymakers provide clear signals about their intentions regarding taxes, regulations, and other issues that affect businesses’ operations, companies can plan accordingly.

The World Bank’s advice comes at a time when many countries are facing limited fiscal and monetary measures due to global uncertainty. With interest rates low or even negative in some cases and government revenues constrained by economic downturns or pandemics such as COVID-19, policymakers need to find innovative ways to stimulate economic growth while managing debt levels.

Ferro also noted that policy clarity is particularly important for emerging economies like Indonesia where political instability can have a significant impact on business confidence. New administrations need to communicate their policy directions early on to avoid confusion among businesses and households.

In conclusion, improving policy clarity for businesses is critical for sustainable economic growth in times of limited fiscal and monetary measures. Policy uncertainty can lead to hesitation among businesses to invest or expand their operations. Therefore policymakers need to provide clear signals about their intentions regarding taxes

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