Indonesia inflation to continue to ease in 2024 as food, energy prices decline: Bank Mandiri chief economist
Economic growth this year is estimated at 5.05%, while 2024’s target falls between 5.3 and 5.7%
INDONESIA’S next presidential and legislative elections, which will take place in February next year, will have a positive impact on the economy in the form of stable consumption, lower interest rates and higher capital expenditure.
Andry Asmoro, the chief economist of Mandiri Bank, one of the nation’s largest lenders, made this point at an event organised by the Indonesian Investment Coordinating Board in Singapore on Friday (Dec 8).
Speaking at a forum on Indonesia’s investment outlook and opportunities in the green economy, Andry said that inflation in Indonesia had fallen to around 3 per cent. He expects inflation to continue to ease in 2024 as food and energy prices decline.
He added that Indonesia’s current account is forecast to record a deficit of 0.2 per cent this year, while most emerging markets sit at around 2 per cent.
Indonesia’s government debt-to-gross domestic product (GDP) ratio in 2023 is also forecast to be around 39 per cent, which is lower compared to other countries in the region like Singapore (168 per cent), Malaysia (67 per cent) and the Philippines (58 per cent).
As for the state budget, Indonesia’s fiscal deficit is expected to be maintained at 2.3 per cent of GDP in 2023, said Andry. He noted that Indonesia’s long-term economic trajectory will remain stable with annual GDP growth of more than 5 per cent.
A NEWSLETTER FOR YOU
Friday, 8.30 am
Asean Business
Business insights centering on South-east Asia's fast-growing economies.
The acceleration will mainly be driven by household consumption and export recovery, he said.
While Andry noted that elections generally have no impact on consumption, which he said will remain “relatively stable”, he stressed that investors tend to adopt a “wait-and-see approach” that usually results in a slowdown in investment. He also anticipates lower interest rates and escalating capital expenditure prior to 2025.
In his remarks at the event, Indonesia’s Ambassador to Singapore Suryo Pratomo said: “The upcoming presidential and legislative elections will undoubtedly play a pivotal role in strengthening and focusing the direction of our economy.”
Economy drivers
Indonesia has a target of a combined foreign and domestic investment of 1,650 trillion rupiah (S$142.1 billion).
Manufacturing remains a key driver of South-east Asia’s largest economy and its growth is supported by strong domestic demand, said Amalia Adininggar Widyasanti, the acting head of Statistics Indonesia.
The priority areas within the manufacturing sector include basic industries like chemical and steel; downstream industries like mining; and the sustainable consumer goods industry.
Meanwhile, the sectors that are seeing double-digit growth include transportation and storage, which grew by 14.7 per cent in the third quarter of 2023 on the back of increased human mobility. Accommodation and food services activities also grew by 10.9 per cent, driven by an increase in hotel occupancy and tourism.
Likewise, the information and communication sector grew by 8.5 per cent amid an increase in data usage traffic and economic activities, as well as the increasing number of Internet users in Indonesia.
“Indonesia’s economic performance remains well-maintained, with growth of around 5 per cent in the midst of global uncertainty,” Amalia pointed out. “Indonesia’s economic resilience is quite strong and our economy is stable with good prospects in the future.”
Vision 2045
Amalia reiterated the nation’s ambitious Golden Indonesia plan, which spells out the aim to become a high-income country that ranks among the world’s top five economies by 2045.
The world’s fourth most populous nation reclaimed its upper-middle income rank last year, after it fell to the lower-middle status during the Covid-19 pandemic in 2020.
To meet its goal, annual economic growth of between 6 and 7 per cent is needed, Amalia noted. She added that the growth outlook this year is estimated at 5.05 per cent, with next year’s target likely to fall between 5.3 and 5.7 per cent.
Copyright SPH Media. All rights reserved.
