Indonesia's Economy Continues To Grow, ADB: The Risk Of Decreased Remains

Rupiah (Photo: antara)

JAKARTA - The Asian Development Bank (ADB) stated that Indonesia's economic activity continues to grow amid global risks. Although, there are obstacles to increasing global interest rates and geopolitical tensions in the world.

Director of ADB for Indonesia Jiro Tominaga said Indonesia is expected to maintain economic activity, with the growth of gross domestic product (GDP) projected at 5 percent in 2024 and 2025.

"(As well as) the inflation rate of 2.8 percent in the two years," said Jiro quoting Antara.

According to him, the projected economic growth was driven by strong private consumption, public infrastructure spending, and gradual increase in investment.

On the other hand, Jiro said there is also a risk of a decline. Although the general election (election) in February 2024 increased the confidence of the business world, thus encouraging increased investment and consumption, the constant pressure of rupiah depreciation could encourage Bank Indonesia (BI) to tighten liquidity, which has the potential to have a negative impact on domestic demand.

In addition, global demand may weaken due to geopolitical tensions and financial market turmoil, thereby reducing net export contributions to economic activity.

Factors such as the prolonged high interest rate of the Federal Reserve (US) Federal Reserve (The Fed), continued geopolitical uncertainty, and climate change-related shocks could disrupt global value chains and worsen trade conditions.

Previously, Coordinating Minister for Economic Affairs Airlangga Hartarto emphasized that the government always prepared scenarios to reduce the impact of global geopolitical turmoil on the Indonesian economy, especially for the real sector.

"Skenarios, the government is always preparing. But now we are still waiting for developments (Iran-Israeli conflict)," said Airlangga during a press conference in Jakarta, Thursday (18/4).

Airlangga said that so far the potential for escalation between Iran and Israel has not been seen significantly. The Indonesian government is also still watching the development of geopolitical turmoil between the two countries.

He explained that the statements issued by world leaders so far tend to be the same, namely wanting to avoid escalation.

According to Airlangga, investors have a good level of confidence in Indonesia's economic resilience. The national economy is also expected to continue to grow in the range of 5 percent this year.

"Indonesia is far above the development of the global economy (which is estimated to grow 3.2 percent in 2024). The global economy is estimated to be flatten or permanent, while Indonesia is 5.1 percent in 2025. Developed countries also have an average (economic growth) of 4.2 percent," he also said.