Anticipating Trump’s policy

DURING his campaign period, Trump offered many controversial programs. Trump will focus more on domestic policies, such as protective economic policy. This has led to anxious in global trade.

Aside of the protection, Trump will cut tax for middle income class, as well as reduce tax for corporate from 35% to 15%. Trump also offers tax holiday to attract American investors to repatriate their funds.

However, on the other hand, this billionaire from Republic Party promises to spend government’s infrastructure spending in a massive manner. This is potentially to enlarge the deficit. The policy also leads to unease in emerging markets, on the grounds that Trump apparently will invite the investors to shift their funds from emerging markets to smoothen his way to realize his programs.

Trump’s policies may change global economic map. Therefore, Indonesia should anticipate Trump’s future policies.

According to Director of Macro Planning and Statistic Analysis at Ministry of National Development Planning Amalia Adininggar Widyasanti, some simulations have been conducted to examine future impacts of Trump’s policies. The results are surprising: the US, as well as global economic will slow down. “This includes Indonesia. Indonesia’s economic growth in 2017 can be 0.14% lower than the baseline,” she said.

Is Indonesia ready? As of the third week of January 2017, the government has not yet conducted special analysis to anticipate Trump’s policies. Presidential spokesman Johan Budi admitted that the presidential office has not yet decided special agenda to discuss about this matter. However, the government will always monitor global economic development, including the impacts of Trump’s statements and policies.

Minister of Finance Sri Mulyani said that the combination of expansive fiscal policies and protection will bring negative impacts to global economic. Indeed, Indonesia has also to anticipate the US’ monetary policy.

According to Amalia, aside of monitoring, Indonesia will prepare some policies related to investment climate to anticipate Trump’s policies. The policies have to be able to attract investors to sustain their investments in Indonesia.

The government should also maintain the stabilities in terms of macro economy, inflation rate, and foreign exchange rate. “We need to sustain public’ purchasing power to strengthen domestic economy,” Amalia said.

Economist at Samuel Aset Manajemen (SAM) Lana Soelistianingsih said that the US apparently will cover its fiscal expansion with debts. As information, the US is the largest debt market in the world. In other words, the US seems to absorb massive amount of the global funds, while Indonesia also needs to make debts to generate funds. Therefore, the government needs to prepare appropriate strategy to issue government bonds in order to prevent investors to shift their funds to buy the US’ government bonds.

“I believe that Ministry of Finance has prepared to issue the bonds,” Lana said. The government seems to issue the bonds in the first semester so as not to coincide with the implementation of Trump’s policies.

The new US president will boost the fiscal expansion in 2018. The budget period of the US will start on 1 October and will terminate on 30 September of the subsequent year. In other words, until 30 September 2017 Trump will still use the State Budget, which was arranged by Obama’s government.

Therefore, the government needs to make debts during quarter I-quarter III before Trump starting the budget period.