JAKARTA, Feb 26 (Reuters) - International Monetary Fund Managing Director Christine Lagarde on Monday called on Indonesia to boost its potential growth rate and channel revenues to more development spending to help create jobs for its growing labor force.
After meeting with President Joko Widodo at the start of a week-long trip to Indonesia, Lagarde praised the country's economic management and stronger policies.
"Indonesia's economy continues to prove resilient with a sound economic performance and favorable outlook," she said in a statement issued after the meeting.
But in recent years, Indonesia has struggled to get its growth rate to exceed 5 percent, well below the pace of China and India, amid tepid consumer demand and foreign direct investment.
GDP growth failed to meet the government's 5.2 percent budget target last year and the IMF is forecasting that Indonesia, Southeast Asia's largest economy, will grow by 5.3 percent in 2018.
Lagarde said she and Widodo discussed the importance of achieving higher potential growth to help create jobs, adding "This requires mobilizing revenues to finance development spending and support reforms in the product, labor and financial markets."
In its recent annual review of Indonesia's policies, the Fund said the government should focus on financing infrastructure with domestic revenue in order to avoid a build-up of external debt.
Lagarde, whose visit comes two decades after a painful IMF bail-out imposed harsh austerity on Indonesia, praised the country's greatly expanded health care system during a hospital visit.
Widodo also took her shopping at a crowded Jakarta textiles market, along with Indonesian Finance Minister Sri Mulyani Indrawati.
The IMF chief on Tuesday will participate in an economic conference , featuring central bankers and other officials from ASEAN countries, focused on new growth models and adjusting to rapidly changing technologies.
She also plans to visit the city of Yogyakarta in Java and the island of Bali, where the IMF will hold its annual meetings in October. (Reporting by David Lawder and Maikel Jefriando; Editing by Richard Borsuk)