Heaptalk, Jakarta — The Minister of Finance Sri Mulyani Indrawati is optimistics that Indonesian Economy can grow above 5% in 2024.
“Previously, in the Macroeconomic Framework and Principles of Fiscal Policy (KEM-PPF) 2024, the economic growth was targeted for approximately 5,3%-5,7%. However altered in the range of 5,1%-5,7%. Ultimately, the Government and the House of Representatives (DPR) agreed to set the growth economy according to the macro assumptions of the State Budget (APBN) 2024, at the 5,2% level,” explained Sri Mulyani at the 2024 Indonesian Economic Outlook National Seminar held at the St. Regis, Jakarta on Friday (22/12/2023),
According to Sri Mulyani, there are several factors that supports Indonesia’s economic optimism, notably the improved global economic growth and the predictions of international institutions mentioned 2023 was quite the dark year for economy in several big countries due to rising interest rates partially realized.
“Even for the United States, it looks like there is hope thanks to the resilience of the economy until the end of this year (2023-Ed). At the very least, the largest world economy can survive with the big escalation of rising interest,” explained Minister Sri Mulyani.
The optimism of the Finance Minister is aligned with predictions from a number of foreign institutions. From the 2024 Global Economics Outlook: The Last Mile Morgan Stanley as an example, it mentioned that the Indonesian economy will consistently grow in the range of 5% until 2025. At the end of 2023, it was predicted that the economy will be at the 5% level, and 5,1% in 2024, and soon will be 5,2% in 2025.
In Indonesia, Morgan Stanley wrote, the growth momentum will be strongly firm with the factor shifted to the recovery phase that tends to be supported by capital expenditure and consumption, rather than commodity exports.
Even though filled with optimism, the Indonesia Government still feels the need to stay alert. The reason being several dynamics happening at the global level is predicted to have a big influence on the global economic growth. For example, the IMF in the outlook as of October 2023 has predicted the 2024 growth economy can only reach 2,9%, down from projections for 2023 of 3%. That projection also experienced a downfall from 2022 for around 3,5%. The World Bank predicted that in 2024, the growth will only reach 2,4%, a slight increase from 2023 where growth will only be 2,1%.
There are several factors that could put pressure on the global economy in the future and affect the domestic economy, namely the remaining high world inflation, weakening of the Chinese economy, until the commodity of the price volatility.
The price volatility commodity is still triggered by the escalated global conflict tension, namely the Ukraine-Russia and Palestine-Israel conflicts, geoeconomic fragmentation, shock due to climate change,limited fiscal policy globally, until the rise risk of a world debt crisis.
Facing those uncertainties, Minister Sri Mulyani reminded all parties to stay alert. The Government itself has prepared for possible outcomes, notably aiming to maintain the domestic economy due to the consumption of the lower middle class is very large. Thus, the government is still trying to maintain inflation and the increase in food prices.
Food issues, as reminded since the beginning of 2023, are necessary to be looked out for. Along with various policies, such as home purchase incentives, car purchase, and so on. That is hoped to be maintained from the supply side. On the other side, the government also encouraged the middle class that still have purchasing power, to continue to grow.
In addition, from the tax side, it is aimed to have a significant growth. This is to support the economy in the future. However, Sri Mulyani warned that this matter becomes the critical point for Indonesia because of the need to maintain momentum growth that becomes the tax base.
“The growth from tax receivement this year is still at 7%, so it’s quite remarkable despite the baseline increase. This will cause the tax ratio to improve and then we will focus on shopping to be better, even though this is the last presidential term of Jokowi. It is possible that the critical points are quality spending and speed of spending,” she elaborated.
The Minister of Finance said that high and sustainable economic growth must also be encouraged with productivity through infrastructure improvements and the Indonesia human resource quality. Furthermore, the Minister of Finance assesses the State Budget (APBN) and also needs to maintain various uncertainties in the future.
“The State Budget (APBN) during this time from the start of the pandemic or even before the pandemic, we always become the effective countercyclical and shock absorber. Certainly this can be done if the State Budget is credible and healthy and strong. That’s why besides the human resource issue and infrastructure for productivity, maintain the State Budget to be credible and firm,” concluded the Minister of Finance.
Editorial Team: Wulan Dari, Prazna Alyfia Ghefira
