The slowdown in economic growth is predicted to lower investors’ interest in the digital sector.
Heaptalk, Jakarta — Global economic growth is predicted to experience a slowdown in 2023. According to the economist at the Institute for Development of Economics and Finance (Indef) Nailul Huda, the impact of the economic slowdown will be felt by all industries, including the digital industry in Indonesia.
Nailul delivered that the slowdown in global economic growth could lead to a decrease in optimism for expectations of the gross merchandise value (GMV) in 2025. Based on data issued by Google, Temasek, and Bain, the potential for GMV in 2025 will reach US$146 billion but in 2022 it tends to decrease to only US$130 billion.
In addition to GMV, the slowdown in economic growth is predicted to lower investors’ interest in the digital sector. According to Nailul, the highest investments in the digital sector are in Singapore and Indonesia. In 2022, investment in the digital economy in Indonesia shows a decline.
An increase in the benchmark interest rate by the Fed leads to an increase in the cost of funds in investment. Investors are reluctant to invest with high-interest rates, resulting in the investment value continuing to decline. “What happened is the termination of employment for the company’s efficiency,” said Nailul at the forum of Digital Industry Forecast (Diecast) 2023 in Jakarta (12/05).
Apart from investment, Nailul said that the large number of companies implementing the layoff policy is also caused by a decrease in expectations as indicated by the decline in digital adoption, specifically e-commerce, in 2022. Digital adoption in the form of e-commerce in 2021 was 75% while in semester 1 of 2022 the number declined to 29%.
Accelerating digital transformation to boost GDP
In the same forum, General Chair of the Indonesia Telematics Society (Mastel) Sarwoto Atmosutarno highlighted that digital transformation must be accelerated to help boost gross domestic product (GDP) in the digital sector.
Currently, Indonesia’s digital GDP is around 5.5%, while its market value GDP is 30%. Meanwhile, the growth of the computer and electronics industry fell by 0.51% based on 2019 data from the Central Statistics Agency (BPS). To accelerate digitalization, Sarwoto suggested several steps that could be taken, including promoting new technologies both in terms of access, reach, and capacity.
According to Zoho Indonesia Country Lead Handito Saroso, companies need investment in technology during these difficult conditions. Investing in technology can provide many benefits for companies, one of which is to enable cost efficiency.
Further, Handito said that the growth of the technology business is still relatively good. Based on Gartner data, global digital business growth has grown by 5%, while digital business in Indonesia can still grow double digits.
In a response to the slowdown in economic growth, Handito suggested business actors redefine business directions and priorities. “Several digital companies are reconditioning their business to improve their fundamentals. Later when the market rises again, they are much better prepared and they have a longer runway,” said Handito.
Lastly, business actors should increase the growth of their technology implementation in areas that are currently not digitalized yet. For companies that are technologically well established, there is still potential for improvement, for example utilizing newer technology to run the business more efficiently. Technology substitution can also be applied to obtain more affordable functions compared to what the companies have now.
