Bank restructuring and its implication on Indonesian macro economy and agricultural sector

Abstract

The impacts of bank restructuring on the Indonesian macro economy, and its various sectors, especially the agricultural industries, are assessed and analyzed using an Indonesian Forecasting Model. The model is more detailed sector-wise than existing Indonesian CGE models and incorporates flexibility to capture alternative assumptions regarding land and investment behavior. The impacts are assessed under several alternative settings including various scenarios on capital augmenting technical change and rate of return to capital on all industries. The failure of bank restructuring will have a bad impact on the Indonesian macroeconomic performance. It will reduce the GDP from both income side and expenditure side. The impact become worst if it will reduce the efficiency of using capital in all sector. The high effort of internal and external banking system should be done to make a successful of bank restructuring. The successful of bank restructuring will increase the output bigger than the failed of bank restructuring or will minimize the negative percentage change. Paddy is one example have a positive percentage change. The government policy is still needed to encourage banking sector to give a soft loan to the agricultural sector. Key Word: Bank restructuring, CGE, agricultural and economic development