ADB Estimates Indonesia's Economy To Grow 5 Percent In 2024 And 2025

Illustration (Photo: Doc. ANTARA)

JAKARTA - The Asian Development Bank (ADB) estimates that Indonesia's economy will grow 5 percent in 2024 and 2025, supported by investment and private consumption.

"In balance, domestic demand will continue to encourage growth and balance the weak contribution of net exports," ADB said in the April 2024 Asian Development Outlook annual report quoted from ANTARA, Friday, April 26.

ADB chief economist Albert Park said strong private consumption, public infrastructure spending, and gradual increase in investment will help maintain gross domestic product (GDP) growth by 5 percent in 2024 and 2025.

Inflation is expected to decline from an average of 3.7 percent in 2023 to 2.8 in 2024 and 2025.

Better supply side management and maintained inflation expectations will help keep inflation in the range of lower inflation targets.

According to him, the inflation control team and the National Movement for Food Inflation Control will continue to play an important role in managing inflation caused by domestic costs.

In 2024, a smooth general election (election) in February can increase the confidence of the business world, resulting in stronger and faster investment attractors.

However, it is possible that the Fed's interest rate will remain higher in the longer term than expected, geopolitical uncertainty that continues, and further climate change-related shocks could disrupt the global value chain and lead to a sharper decline in trading value.

On the other hand, monetary policy will continue to target price stability, focusing on managing capital flows and exchange rates.

Fiscal policy will stimulate growth in 2024. The government increased the target budget deficit in 2024 to 2.3 percent of GDP from 1.7 percent of GDP in 2023. Public employee salaries increased.

The social protection budget is estimated to increase by around 12 percent.

Total public investment in 2024, including financing investments such as capital injections into state-owned enterprises, will remain at 1.9 percent GDP.

Government revenue is expected to increase by one percent in 2024, and spending will increase by 6.1 percent. Due to the government's careful projection, revenue may exceed expectations and reduce deficits.

Expenditures related to elections, government social assistance programs, increased salaries of civil servants in 2024, and lower inflation estimates during the estimated period will increase consumption.

Investment is likely to remain stable in 2024 and increase in 2025, driven by government projects and previous reforms.

The current government is likely to accelerate infrastructure priority projects and the capital city of the archipelago (IKN) until the new government starts taking office in October 2024.

Private investment is expected to increase in 2025 when the new government sets its plans, and the wait and see attitude of the business world towards investment fades.

Manufacturing is expected to continue to grow as the manufacturing purchasing manager index continues to increase over the past 30 months.

The implementation of the Omnibus Law on Job Creation is also expected to help boost investment by 2025.