Sett, This Is The Key To The Success Of Indonesia's 5.44 Percent Economic Growth

Main Expert Staff of the Presidential Staff Office Edy Priyono . (KSP photo)

Jakarta - The Central Statistics Agency (BPS) announced that Indonesia's economic growth in the second quarter of 2022 was 5.44 percent year on year. Main Expert Staff of the Presidential Staff Office, Edy Priyono, said that this achievement could not be separated from the hard work of the government and monetary authorities in controlling inflation. Where in July 2022, annual inflation reached 4.94 percent.

Edy said that the government's policy to increase the subsidy budget and energy compensation to hold down the price of subsidized fuel oil (BBM), gas and electricity, made inflation relatively controllable. So that public consumption is still growing quite well, which is 5.51 percent. This condition is also supported by high export growth due to rising commodity prices as well as the momentum of fasting and Eid.

"These elements are what make Indonesia's economic growth grow very well in the midst of relatively high inflation in the second quarter of 2022," explained Edy, Saturday, August 6.

Edy emphasized that with the achievement of economic growth of 5.44 percent in the second quarter of 2022, the threat of a recession is very likely not to occur in Indonesia. However, he warned of the possibility of a slowdown in economic growth.

According to him, there are two reasons that make Indonesia's economic growth slow down. Namely, from a monetary and fiscal perspective. From the monetary side, he explained, although until now Bank Indonesia has not raised the benchmark interest rate, there has been an increase in the Statutory Reserves (GWM). "The implication is that credit from banks is not as big as before," explained Edy.

Meanwhile, from a fiscal perspective, the government's policy to increase the subsidy budget has the potential to reduce Indonesia's opportunity to use windfall profits due to rising commodity prices for productive purposes. "Moreover, starting in 2023, we must return to a budget deficit of a maximum of 3 percent. This means that the budget for spending is getting tighter," he explained.

Edy also said that the government continues to be aware of the potential for inflation to rise, especially if world oil prices cannot fall again and are still above 100 US Dollars per barrel. This is because, from a fiscal perspective, the provision of energy subsidies is increasingly limited. So it is possible to make price adjustments.

Another challenge, said Edy, is the increase in interest rates that have been carried out by several countries. He considered that if Indonesia did not do the same, there would be a risk of capital outflows or capital outflows which could have an impact on the weakening of the rupiah exchange rate.

“On the other hand, if BI is forced to raise its benchmark interest rate, lending will be disrupted and in turn, real sector growth will also slow down. Once again, the government, BI and other related institutions will certainly work together so that we can face these challenges and go through them well," he concluded regarding Indonesia's economic growth.