World Bank Forecasts Indonesia’s Economic Growth Below 5% for 2023, Global Outlook Shows Positive Trends

Indonesia's economic growth

The World Bank has made a forecast regarding Indonesia’s economic growth, predicting that it will remain below 5 percent by the end of 2023. According to the latest edition of the Global Economic Prospect (GEP) report released in June 2023, the World Bank estimates that Indonesia’s economy will only grow by 4.9 percent in the same year. This projection aligns with their previous outlook in April 2023, which also anticipated a growth rate of 4.9 percent.

The World Bank’s forecast extends beyond Indonesia and includes projections for economic growth in Southeast Asia, excluding China. They anticipate a moderate growth rate of 4.8 percent for the region in 2023. This aligns with the reopening of China’s economy and the gradual release of pent-up demand.

However, the World Bank cautions that the positive impact of China’s recovery might be limited, primarily due to the concentration on domestic service activities. As stated in the Global Economic Prospect (GEP) report of June 2023, the effects on the global economy might not be as significant as initially anticipated.

Looking ahead to 2024, the World Bank predicts that Indonesia’s economic growth will maintain a similar pace, with a projected growth rate of 4.9 percent. It is worth noting that this projection falls below the government’s target. The government’s Macroeconomic Policy Framework and Fiscal Policy Priorities (KEM PPKF) for the 2024 State Budget (APBN) assumes a more optimistic growth range of 5.3 to 5.7 percent.

Sri Mulyani, the Indonesian Minister of Finance, expressed that the government considers the projected economic growth of 5.3 to 5.7 percent in 2024 as a realistic assumption. This statement reflects their confidence in the country’s economic prospects for the upcoming year, despite the World Bank’s more conservative estimation.

Shifting focus to the global economic outlook, the World Bank has revised its projections for global economic growth, indicating a more positive trend. However, the report also serves as a reminder that economic slowdown remains a concern throughout the forecast period until 2024.

The World Bank’s latest estimate suggests that the global economy will experience growth of 2.1 percent in 2023, surpassing their previous projection of 1.7 percent. This upward revision reflects a more optimistic view of the global economic landscape, although potential risks and challenges persist.

Overall, the World Bank’s forecasts provide valuable insights into the economic trajectories of both Indonesia and the global economy, allowing policymakers and stakeholders to make informed decisions and undertake appropriate measures to promote sustainable growth and development.