According to Investor.Id, PT Bank Mandiri (Persero) Tbk is predicting that Indonesia’s economic growth in Q3/ 2022 could reach 6-percent Year on Year (YoY), higher than the previous quarter’s level of 5.44-percent. This is driven by demand and public mobility which continues to improve amidst the easing of the PPKM as well as the strengthening of the manufacturing PMI which reflects the strong performance of the supply side, claims the reporting.
“We still see that Indonesia’s GDP in Q3/ 2022 remains solid, growing at around 6-percent YoY. But this is also the impact of the low-base effect in Q3 2021, which implements Emergency PPKM due to the Delta variant,” said Bank Mandiri economist Faisal Rachman in a macroeconomic preview on Friday (11/4/2022), in anticipation of the announcement of economic growth data by the National Agency for Economic Affairs. Statistics Center, Monday (7/11/2022), next week.
As a result of the Emergency PPKM triggered by the Delta variant, Indonesia’s economy is under pressure until it only grew 3.51-percent YoY in Q3/ 2021. This growth dropped sharply compared to Q2/ 2021 which grew to 7.07-percent YoY and was recorded as the lowest positive economic growth during the Covid-19 pandemic.
However, despite the impressive annual growth, Faisal said, on a quarterly basis, Bank Mandiri sees the risk of a partial slowdown amid soaring inflation, particularly related to the increase in subsidized fuel prices on September 22. “On a quarterly basis, GDP in Q3/ 2022 is estimated to grow at a slower rate of 2.09-percent (Quarter on Quarter) from 3.72-percent Q2/ 2022,” he said.
According to Faisal, household consumption is estimated to be the main source of annual economic growth in Q3/ 2022. “We estimate that annual household consumption growth will continue to strengthen, supported by improved community mobility, social assistance, and the low base effect in Q3/ 2021,” he explained.
Meanwhile, government spending growth, added Faisal, is estimated to continue to contract annually in line with the increasingly controlled Covid-19 situation, which has an impact on reducing the cost of the pandemic handling program.
“Annual growth in gross fixed capital formation (PMTB) or investment is predicted to strengthen, in line with the expansion of the manufacturing PMI. Net export performance looks solid, still due to maintained external demand and the improving tourism sector,” he explained.
Bank Mandiri maintains that economic growth forecasts in 2022 are likely to increase. We still see household consumption which is the driving force of the Indonesian economy strengthening in line with improving demand and community mobility, thanks to the success of the Covid-19 vaccination program which led to the relaxation of PPKM.
Moreover, said Faisal, high commodity prices provide a windfall for the economy, especially the external sector and the state budget. “With healthy domestic demand, strong export growth, prudent fiscal conditions, and solid Covid-19 management, we maintain that Indonesia’s economy has the potential to grow at 5.17-percent in 2022, up from 3.69-percent in 2017 – 2021,” he said.
High inflation in the midst of rising subsidized fuel prices in early September 2022 was originally predicted to damage household purchasing power in the following months to a certain extent. “However, the government has proven successful in reducing food inflation so that it can reduce inflationary pressure on consumption as a whole,” he said.
Faisal said the high performance of key commodity exports could also continue to generate unexpected export earnings and fiscal revenues, enabling the government to maintain social assistance and cash transfers, while still reducing the budget deficit towards fiscal consolidation in 2023.
“Because Indonesia’s economic fundamentals remain solid, we see Indonesia’s economic growth to slightly decline to 5.04-percent in 2023. This forecast is motivated by the increasing risk of a global economic recession next year amid aggressive global monetary normalization to combat high inflation,” concluded. Faisal.