ADB: Domestic Consumption And Macroeconomic Management Supports Indonesia's Economic Growth Projected To Reach 5 Percent

Director of Asian Development Bank (ADB) for Indonesia Jiro Tominaga. (Photo: Doc. Antara)

JAKARTA - Director of Asian Development Bank (ADB) for Indonesia Jiro Tominaga said domestic consumption, infrastructure spending, investment and solid macroeconomic management support Indonesia's economic growth which is expected to grow by 5 percent in 2024 and 2025.

"In general, Indonesia's economic fundamentals are quite strong combined with solid macroeconomic management," said Jiro on the sidelines of a series of activities for the 57th ADB Annual Meeting in Tbilisi, Georgia, quoted from Antara, Monday, May 6.

Jiro said Indonesia has a fairly good economic fundamental with 5.05 percent economic growth in 2023 and inflation maintained in target.

ADB estimates that Indonesia's inflation will move further and lower from an average of 3.7 percent in 2023 to 2.8 in 2024 and 2025.

Although there are risks from externale such as geopolitical tensions, and the United States (US) interest rate that lasts a long time that can put pressure on the rupiah exchange rate against the US dollar, according to Jiro, Indonesia has domestic strength, which is supported by domestic consumption and strong macroeconomic management.

"Domestic consumption is very strong, private consumption is very strong, and there is also an increase in investment," he said.

The government also continues to spend infrastructure, especially in completing strategic and priority projects that will encourage economic growth.

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 gross domestic product (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.

Previously, Bank Indonesia (BI) Governor Perry Warjiyo estimated that economic growth in the first and second quarters in 2024 would be higher than the fourth quarter of 2023, supported by strong domestic demand.

"Economic growth in the first and second quarters of 2024 is expected to be higher than the fourth quarter of 2023, supported by domestic demand that remains strong from household consumption in line with Ramadan and Eid al-Fitr 1445 Hijri," Perry said in Jakarta, Wednesday (24/4).

Building investment is higher than predicted, supported by the continuation of National Strategic Projects (PSN) in a number of areas and the development of private property as a positive impact of Government incentives.

Spatially, economic growth across the region remains good, supported by domestic demand, especially household consumption.

With these various developments, Indonesia's economic growth in 2024 is projected to be in the range of 4.7 percent to 5.5 percent.

In the future, Bank Indonesia will continue to strengthen policy synergies with the government, including through the Government's fiscal stimulus with BI's macroprudential stimulus, to support sustainable economic growth, especially in terms of domestic demand.