World Bank Predicts Indonesia Economy in 2023 Continues to Grow Slow

The World Bank predicts that Indonesia’s economic growth in 2023 will continue to grow but experience a weakening trend. Indonesia’s economy is estimated to grow only 4.8 percent next year, lower than the World Bank’s projection of Indonesia’s economic growth this year can reach 5.2 percent.

“Indonesia is still strong even though it is slowing down,” Chief Economist at the World Bank for Indonesia, Habib Rab at the Launching of the World Bank Report: Indonesia Economist Prospect (IEP) 2022 at Soehana Hall, The Energy Building, SCBD Area, Central Jakarta, Thursday (15/12).

In terms of the inflation rate, throughout 2023 the World Bank estimates it will be at the level of 4.4 percent. Due to tighter financial conditions, Indonesia’s inflation rate in 2023 is expected to be above the central bank’s assumption. Moreover, commodity prices will also slow down, but will still be higher than their history.

So that next year’s inflation rate could reach 4.4 percent. However, in 2024 and 2025 it will only be under control at the level of 3.7 percent. “The average inflation will be 4.4 percent in the next year and inflation will be 3.7 percent in 2024 and 2025,” said Habib.

Habib said Indonesia’s economic growth next year would still be colored by various conditions. Among them is private consumption growth which has slowed down amid rising prices for several global commodities.

Several other things need to be paid attention to by the government, namely related to the fiscal deficit. Habib said the fiscal deficit would be below 3 percent of the Gross Domestic Product (GDP).

This condition was driven by an increase in government revenue and reduced state spending related to Covid-19. The current account has a modest deficit, meaning that external financing has decreased.

So in conditions like this, the government’s policy response will be decisive amid commodity price shocks, pressure from the government, and a weakening rupiah exchange rate against the dollar. This is important for the people who directly feel the impact.

“How all of this is handled will greatly impact the people who feel it,” he concluded.

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