Kompas are reporting on the recent economic growth projections from the IMF for Indonesia, which has increased from a previous estimate of 4.8-percent in the January 2023 edition of the World Economic Outlook (WEO) report to 5.0-percent.
The projection was made by the IMF by estimating the performance of the Indonesian government in maintaining the current account balance, inflows of foreign direct investment (FDI) and portfolios. The IMF said that macro policies must be focused on maintaining stability and building policy space to deal with future shocks.
This Year Assistant Director of the IMF Western Hemisphere Department, Cheng Hoon Lim, said Indonesia’s economic policies had succeeded in showing healthy growth, reduced inflation, and a stable and profitable financial system. “The authorities use monetary and fiscal policy space flexibly to facilitate economic adjustment to significant global shocks, putting the Indonesian economy in a good position for sustainable strong and inclusive growth,” he said in an official statement, quoted on Sunday, say Kompas.
He added, Indonesia’s economy is projected to continue to be strong. This was driven by the high prices of some of Indonesia’s export commodities. Economic growth will be driven by recovery in domestic demand and solid export performance.
Nevertheless, Cheng warned of the possibility of an economic slowdown given the tightening of policy regulations and the normalization of commodity prices. “In general, risks are balanced. A faster recovery in China or easing of global inflationary pressures can strengthen demand for Indonesian exports,” he added.
He said that a sudden tightening of global financial conditions or a global slowdown that weakened the trade balance could put pressure on the rupiah. Also, intensification of geopolitical tensions could also disrupt supply chains and amplify inflationary pressures.
Furthermore, Cheng said, high commodity prices and strong economic growth, as well as the new Tax Harmonization Law, helped increase tax revenues. On the other hand, the increase in the price of fuel oil (BBM) in September helped stem the rising subsidy bill. “Going forward, fiscal policy in 2023 must remain broadly neutral, enabling Indonesia to continue to meet its development needs while maintaining policy credibility,” he said.