The probability of a recession in Indonesia is only 3% based on Bloomberg data, while Malaysia has 10%, Thailand 13%, and Srilanka 85%.
Heaptalk, Jakarta — Amidst predictions of global economic uncertainty in 2023, Indonesia still has the opportunity to face a bright future in 2023 as conveyed by the executive director of Next Policy Fithra Faisal Hastiadi at the Bank Indonesia (BI) Talks with the theme “Should We Worry About Global Economic Uncertainty?”.
The optimism rises as Indonesia’s economic growth projections are revised at 5.1% in 2022, from previously 5%. Fithra emphasized that the probability of a recession in Indonesia is only 3% based on Bloomberg data, while Malaysia has 10%, Thailand 13%, and Srilanka 85%.
“We have 3% meaning it may or may not happen. Quoting President Joko Widodo, we are optimistic but remain vigilant,” said Fithra. If a bad case occurs next year, he predicted that Indonesia will still grow positively with the worst-case scenario experiencing an economic slowdown.
Based on the results of forensic data that Fithra and his team have analyzed, the economic turmoil can be caused by two variables, namely the covid-19 pandemic and inflation. Covid-19 case numbers in Indonesia are sloping down in 2022. Fithra said that there is a possibility of a spike in cases but the bed occupancy rate is still normal, meaning the disease is shifting to become endemic. Thus, the pandemic is not the cause of economic turmoil anymore.
Meanwhile, inflation must occur when the economy grows. However, inflation in recent years, specifically in 2022, tends to be a burden on the economy according to Fithra. Therefore, he assumed that the greatest possibility of economic disruption comes from inflation.
“Currently inflation is lowered to reduce the burden on the economy. That is the mechanism when interest rates are raised, inflation will fall. Later, we will see the prospects for economic growth becoming more positive,” explained Fithra.
Remains a bright spot in a worsening global economy
Fithra further voiced that the country should be grateful as it is still very fortunate compared to other countries, for example, Germany. “The condition of the German people is now tough. The costs for energy or gas alone have increased ten times from 100 euros to 1,000 euros per month since their country is dependent on Russia. It is so expensive,” conveyed Fithra.
As a result, they now use double jackets in winter to save money, whereas Indonesia does not experience the same predicament. Quoting the Managing Director of the International Monetary Fund (IMF) Kristalina Georgieva, Indonesia remains a bright spot in a worsening global economy.
In more detail, Fithra conveyed several macroeconomic indicators which showed positive performance, one of which is the unemployment rate which fell by 700,000 people. Indeed, there have been restructurings in several sectors, spanning textiles and startups.
Yet, the overall realization of economic growth in Q3 2022 is 5.72% above the economic consensus of 5.5-5.6% in Q3. This number is better than the previous quarter’s 5.45% resulting in the optimism that Indonesia’s economic development is still on the right track.
In addition, inflation which has become a global fear plus fuel price adjustments showed a lower figure than expected, namely 5.7% in October 2022 year-on-year (YoY) and reached 5.9% in the previous month. This condition is partly due to the success of the government and Bank Indonesia in controlling inflation both intervention from interest rates and the supply side.
Fithra encouraged the public, especially young people, to continue doing the activities they have previously carried out as that will spur economic growth. “We are optimistic but must be aware not to spend all of our income. We need savings to protect the future. There must be a balance between expenses and income,” concluded Fithra.
