IMF: Indonesia’s Economic Prospects Will Still Shine

Indonesia's economic growth

The International Monetary Fund (IMF), in its World Economic Outlook: Countering The Cost-Of-Living Crisis report, confirmed that Indonesia’s economic prospects will continue to shine amidst the crises occurring in most parts of the world.

The IMF maintains Indonesia’s economic projection for this year at 5.3%. However, it cut its economic growth forecast from 5.2% to 5% in 2023.

This IMF projection is lower than the macro assumption set in the 2023 State Budget, which is 5.3%.

According to the IMF, Indonesia’s economic prospects are even able to overtake China and the United States.

Meanwhile, a recession is certain to hit the United States (US) with a projected growth of 1.6% in 2022 and a decline to 1% in 2023. Europe is even worse with a projection of 3.1% to 0.5% in 2023.

Japan tends to be stable where for 2022 and 2023, the economy grows by 1.7% and 1.6%, respectively.

China experienced an increase from 3.2% in 2022 and 4.4% in 2023. India is projected to grow 6.8% and 6.1%, Brazil 2.8% and 1%, and Mexico 2.1% and 1.2%.

On the other hand, the Indonesia Mission Chief, Asia, and Pacific Department, IMF Cheng Hoon Lim said that Indonesia could still grow high thanks to the high consumption and prices of some of the country’s mainstay commodities.

Lim believes Indonesia will not follow other countries, entering a recession in 2023.

President Joko Widodo (Jokowi) in an event at the Jakarta Convention Center (JCC), Jakarta, Tuesday (11/10/2022), explained several policies that were implemented to anticipate future conditions.

The first step is the synergy between fiscal and monetary policies. This plays an important role in controlling the fundamentals of the national economy. It can be seen that the Indonesian economy was able to grow 5.44% in the second quarter of 2022 and controlled inflation below 6%.

“I see that in daily life, the central bank, BI, and the Ministry of Finance, go hand in hand, the harmony does not overlap,” said Jokowi.

The government boosts economic growth through productive spending and maintains people’s purchasing power with subsidies and social assistance (bansos). Meanwhile, Bank Indonesia (BI) controls inflation and the exchange rate and is wise in taking policy interest rates.

The next step is an effort to trace the problem down to the microeconomy. Thus, the policies adopted can be more targeted.

“We can’t only work on macros. Macro yes, micro yes, but it’s not enough to be sharper, detailed. So that the solutions are one by one,” he explained.