The Asian Development Bank: Indonesia's Economic Growth Can Reach 5 Percent In 2022

JAKARTA - The Asian Development Bank (ADB) projects that Indonesia's economy will return to high growth like it was before the COVID-19 pandemic, namely in 2022 with the figure reaching 5 percent, while this year it is estimated at 4.5 percent.

"Indonesia passed 2020 well, thanks to a well-coordinated and communicated crisis response and strong leadership in tackling the pandemic", said ADB Director for Indonesia Winfried Wicklein in Jakarta, quoted from Antara, Thursday, April 29.

Wicklein said Indonesia will return to its growth path next year driven by a sustainable trade recovery, a revival in the manufacturing sector, and a large national economic recovery budget for 2021.

Wicklein said that household spending in Indonesia is expected to increase in 2021 as the vaccination program advances and more economic sectors resume their operations.

Investment is expected to increase again along with improving economic prospects while the pace of recovery in financing or credit will still lag behind the uncertainty of investor sentiment.

Then for inflation, which reached an average of 1.6 percent last year, it is estimated that it will rise to the level of 2.4 percent in 2021 before finally falling again to the level of 2.8 percent in 2022.

This inflation rate is still within Bank Indonesia's target range because inflationary pressures due to currency depreciation and higher food demand will be partially offset by the decline in prices for goods set by the government.

Furthermore, net exports supported by strong commodity exports will result in a current account deficit of 0.8 percent of Indonesia's gross domestic product (GDP) in 2021.

As investment increases next year and higher volumes of imported capital goods such as machinery and equipment, it is estimated that this will push Indonesia's current account deficit to 1.3 percent of GDP in 2022.

Wicklein said there are several risks to this estimate, including disruption to the global recovery by the threat from mutations of COVID-19, uneven vaccination rates in the world, and unexpected global financial tightening.

Meanwhile at home, the economic recovery can slow down if there is a spike in COVID-19 cases during the month of Ramadan, delays in vaccination efforts, and weaker government revenues.

Therefore, ADB recommends that Indonesia mobilize domestic resources and ensure environmentally friendly economic development.

Then overcome concerns about excessive debt can be overcome by fiscal reform to broaden the tax base, improve tax administration and compliance, and close tax loopholes.

"Also encouraging an environmentally friendly recovery will protect the environment and support economic growth and create jobs", he said.