Indonesian Economy; Should We Be More Optimistic about Indonesia’s Economic Growth in 2022?

Does this mean that the ADB decided to swim against the current (as we have seen various global and domestic institutions lowering their expectations for Indonesia’s 2022 economic growth in recent months), or, are we now witnessing the beginning of improving perceptions of the Indonesian economy? This is the main question that we are going to answer (well, at least try to answer) in this article. And, we do that by taking a detailed look at the latest macroeconomic indicators of Indonesia.

First, let’s take a look at why the ADB decided to raise its outlook for Indonesia. In its latest Asian Development Outlook 2022 Supplement it stated that:

“The 2022 growth projection for Indonesia is raised from 5.0% to 5.2%, reflecting robust domestic demand and exports. Economic activity continues to normalize and COVID-19 infections remain quite manageable. Improvements in jobs, incomes, and confidence are stoking private consumption. Healthy demand and rising credit are stimulating private investment. However, fiscal policy is becoming less supportive as pandemic-related spending is wound down. Higher prices for the key commodity exports, such as coal, palm oil, and nickel, are generating windfall export earnings and fiscal revenue, more than offsetting higher fiscal subsidies for fuel, electricity, and food.”

In essence, there are no new developments mentioned in the paragraph above. And so, possibly the revision was made because the current high commodity price cycle last longer – or peaks higher – than the ADB earlier expected, and because it has now become acceptable to argue that the COVID-19 threat abated significantly since the Omicron variant arrived in late-2021 (allowing governments to ease all restrictions, and thereby allowing room for accelerating economic activity).

In line with Indonesia’s revised outlook, the ADB’s projection for Southeast Asia’s growth in 2022 was marginally upgraded from 4.9 percent (y/y) to 5.0 percent (y/y) as domestic demand benefits from continued easing of COVID-19 restrictions as well as the reopening of borders in some economies in the region.

However, the ADB decided to revise its growth forecast for developing Asia from 5.2 percent (y/y) to 4.6 percent (y/y) in 2022 (which is quite a significant downgrade) as economic prospects worsened as a direct consequence of the Russian invasion of Ukraine, more aggressive monetary tightening in advanced economies, and COVID-19 lockdowns in China.

So, despite facing challenges of higher crude oil prices, the end of low global interest rates and continuing trade and supply disruptions, Southeast Asia seems to be doing slightly better than other parts of Asia (and most other parts of the world).

[...]

This is the introduction of the article. To read the full article you need to order the July 2022 report. This report (an electronic report) can be ordered by sending an email to info@indonesia-investments.com or a message to +62.882.9875.1125 (including WhatsApp).

Take a glance inside the report here!

Price of this report:

Rp 150,000
USD $10,-
EUR €10,-