The World Bank has projected a slowdown in Indonesia’s economic growth for the year 2023. According to their projections, the growth rate is expected to decline to 4.9% from the previous year’s 5.3%. However, it is noted that the country’s overall economic growth will still remain within a similar range in the medium term.
This anticipated deceleration in economic growth is attributed to the normalization of domestic demand following the surge experienced in the aftermath of the pandemic. Additionally, the global economy is also witnessing a slowdown, as previously predicted.
The World Bank highlights that the growth trajectory will be supported by private consumption, as there is a decrease in inflationary pressures. On the other hand, export growth is expected to decline due to weakened global demand and the depreciation of commodity prices.
It is worth mentioning that Indonesia’s fiscal policy is gradually returning to a normal state, reflecting the faster-than-expected fiscal consolidation process. This positive development is underpinned by increased overall revenue and improved public spending discipline.
Furthermore, the successful implementation of tax reforms and the enhancement of the quality of public expenditure, including investments in public infrastructure and growth-oriented programs, will serve as crucial drivers for the country’s future economic performance.
Satu Kahkonen, the World Bank Country Director for Indonesia and Timor-Leste, emphasized the progress Indonesia has made in key areas essential for long-term growth. These areas encompass macroeconomic stability, governance in the public sector, and advancements in infrastructure. The Director further emphasizes that these improvements have played a significant role in addressing extreme poverty within the nation.
In summary, the World Bank’s projections reflect a temporary deceleration in Indonesia’s economic growth for 2023, attributed to the normalization of domestic demand and the global economic slowdown. Nonetheless, the country’s fiscal policies, including tax reforms and improved public spending, are expected to support and propel its economic trajectory in the future.