Independent Securities Projected GDP RI Grows 5.1 Percent In Political Year

Photo: Doc. Mandiri Sekuritas

JAKARTA - PT Mandiri Sekuritas projects that Indonesia's Gross Domestic Product (GDP) growth rate of around 5.1 percent in 2024 will be driven by factors, such as household consumption and inflation.

Chief Economist of Mandiri Sekuritas Rangga Cipta said that his party remains optimistic that Indonesia's national economic growth in the 2024 General Election (Pemilu) year will encourage consumption, although investment has the potential to slow down a little because it is waiting for election results and future policy directions.

"We see the economy growing 5.1 percent in 2024. We see that maybe public consumption can improve due to the electoral effect. There is a spillover from exponential spending to household consumption. It has been proven that it always occurs in election years," he explained at the 2024 Economic and Market Outlook event, Monday, January 29.

Rangga explained that the election would have a positive impact on the national economy, especially the increase in household consumption growth. However, several things such as waiting for election results from investors and global economic volatility need to be watched out for.

Rangga added that growth will also be supported by government spending through the APBN which will increase ahead of the election. He gave an example, such as President Jokowi, who extended social assistance (bansos) until June 2024 and continued several national strategic projects (PSN) that were still delayed.

According to Rangga, this will be a positive catalyst and improve the realization of poor spending in 2023.

"So I think these things might be able to improve the realization of spending a little bit which is actually not good in 2023," he said.

On the other hand, Rangga said that spending and consumption growth can withstand the negative impact of investment which will slow down during the election, because investors tend to wait and see this political contestation.

"Our calculation is that on a net basis the effect of elective spending will be slightly more positive to be offset with the negative effects of investment. That's why we see that economic growth may increase slightly compared to 2023," he said.

In addition, Rangga sees a potential improvement in the fiscal side, although it is not on the government's target and predicts the APBN deficit is in the range of 1.7 percent, better than the previous expectations of 2.3 percent.

Rangga also said that Mandiri Sekuritas projects inflation in 2024 to remain stable at around 3.2 percent and Bank Indonesia (BI) interest rates will decrease by 75bp to 5.25 percent. Although there is still an effect of El Nino's rambutan which makes the main harvest late.

"We are afraid that in the first half there will be a shortage of food supply, so that food inflation will be accelerated. But in general inflation will be stable, such as the BI target of 1.5 percent - 3.5 percent, so there are no risks like what happened in 2022," he said.

As for the Rupiah exchange rate, Rangga estimates that it will strengthen to the level of Rp. 14,900 on average, but still influenced by global economic volatility in the first quarter of 2024.

As for the stock market, Mandiri Sekuritas projects that the Composite Stock Price Index (JCI) will reach 7,640 in 2024.

Central banks in various countries have raised interest rates by 250 bps to 525 bps in the past 2 years which has led to a slowdown in global economic growth.

However, Indonesia, including the ASEAN-5, is projected to continue to grow resiliently amid global volatility.