Even Though The Earth Is In Turmoil, Sri Mulyani Is Optimistic That The Indonesian Economy Remains Strong: This Signal Is Supported By Increased Consumption And Export Performance

Minister of Finance Sri Mulyani (Photo: screenshot of the Ministry of Finance Youtube)

JAKARTA - Minister of Finance (Minister of Finance) Sri Mulyani said that the Indonesian economy tends to have good resilience amid continuing global uncertainty. According to the Minister of Finance, Indonesia's economic improvement can be seen in the projected growth in the second quarter of 2022.

"This signal is supported by increased consumption and investment as well as export performance," he said when giving a press statement after the regular meeting of the Financial System Stability Committee (KSSK) in Jakarta, Monday, August 1.

The Minister of Finance added that various early indicators in June 2022 were recorded to be still good. The Real Sales Index (IPR) grew 15.4% percent year on year (yoy). The performance of the manufacturing sector remained positive as reflected in the Purchasing Managers' Index (PMI) which was still expansive at the level of 50.2 and strengthened again in July 2022 to the level of 51.3.

"We see that the electricity consumption of both industry and business is also growing positively. The Consumer Confidence Index (IKK) increased to a level of 128.2 from the position in March 2022 at the level of 111.0, which shows public optimism about the prospect of economic recovery," he said.

Then, Indonesia's Balance of Payments (BOP) is believed to remain strong amid increasing pressure on capital flows.

The state treasurer revealed that the current account for the second quarter of 2022 is projected to record a surplus, higher than the surplus in the first quarter, mainly due to an increase in the trade balance surplus, in line with the still high global commodity prices.

The Minister of Finance explained that in June 2022 the trade balance surplus was recorded at 5.09 billion US dollars and during the second quarter of 2022 it reached 15.55 billion US dollars.

"The balance of capital and financial transactions is expected to be maintained, supported by capital inflows in the form of foreign investment (PMA)," he said.

Meanwhile, portfolio investment in the second quarter of 2022 recorded a net inflow of USD 200 million. However, entering the third quarter of 2022 (until July 28, 2022), portfolio investment recorded a net outflow of USD 2.05 billion in line with the high uncertainty in global financial markets.

Meanwhile, the position of foreign exchange reserves at the end of June 2022 remained strong, recorded at 136.4 billion US dollars, equivalent to 6.6 months of import financing.

Previously, the Minister of Finance revealed that global inflationary pressures continued to increase in line with high commodity prices due to continued supply chain disruptions, exacerbated by the continuing war in Ukraine, and widespread protectionism policies, especially food.

He said, various countries, especially the United States (US) responded to the increase in inflation by tightening more aggressive monetary policy so as to restrain economic recovery and increase the risk of stagflation.

"Economic growth in various countries, such as the US, Europe, Japan, China and India, is estimated to be lower than the previous projection, accompanied by increasing fears of a recession in the US," he said.

Furthermore, the World Bank and IMF revised down their 2022 global growth projections, from 4.1 percent to 2.9 percent and from 3.6 percent to 3.2 percent, respectively.

"Increasing global financial market uncertainty has resulted in foreign capital outflows, particularly portfolio investment, and pressured exchange rates in developing countries, including Indonesia," closed the Minister of Finance Sri Mulyani.