Trends In Improving Regional Economic Conditions, Transactions During Ramadan And Eid 2022 Push National GDP By 0.14 Basis Points

JAKARTA - Regional economic growth and development has shown significant improvement compared to the previous two years. This improvement was also triggered by the massive infrastructure development in various parts of Indonesia.

This increase in the economy can be reflected in the frequency and nominal of public spending transactions which have characterized an increase since March 2021. Referring to historical data from the Mandiri Spending Index (MSI), spending activities have increased after the government succeeded in reducing the rate of COVID-19 cases, which was followed by an easing policy. mobility by mid-2021.

Bank Mandiri Chief Economist Andry Asmoro explained that the significance of handling COVID-19 in Indonesia was also successful in escalating economic growth in the second semester of 2022 to a sustainable level of recovery. He is optimistic that Indonesia's economic growth has a large space.

Bank Mandiri's team of economists estimates that Indonesia's economic growth rate this year will be in the range of 5.17 percent, starting with a projected 4.95 percent increase in GDP in the first quarter of 2022.

There are several important factors, continued Andry, which can affect the acceleration of Indonesia's economic growth in the future. One of them is the improvement in commodity prices that has been going on since the end of 2020. The increase in prices of Crude Palm Oil (CPO), coal and nickel will increase spending transactions and lead to economic improvement in the region.

"The increase in coal prices will increase sales of commercial cars while the increase in CPO prices will encourage sales of passenger cars. Other derivative sectors are also predicted to experience improvements in line with commodity price stability," said Andry.

Moreover, if people's mobility is relaxed and COVID-19 cases can be suppressed or there are no new deadly variants, then the regional economic recovery will certainly be more massive. Because by doing so, development that triggers improvements in the quality of infrastructure in the regions is able to support the sustainability of economic growth.

Referring to data from the Committee for the Acceleration of Priority Infrastructure Provision (KPPIP), there are at least 201 projects and 10 programs in the Latest National Strategic Projects. Not only in Java, this national strategic project is also spread outside Java.

"The level of infrastructure development, such as toll roads, ports and airports, which are increasingly massive, has an impact on the ease of mobility between regions, both for the mobility of people and goods," he added.

As an illustration, MSI data shows that Indonesian people currently tend to travel by private vehicles throughout the pandemic. This has an impact on increasing car sales and equitable mobility.

In other words, this change in behavior is very much in line with infrastructure improvements that have been carried out by the Government, especially road infrastructure. So the distance between regions is shorter. Infrastructure improvements have the potential to increase development in the region, through the movement of people, money and goods.

"Referring to the calculations of the Bank Mandiri Research Team, transactions during Ramadan and Eid will encourage an increase in National GDP by 0.14 ppt. This improvement will also be evenly distributed to all regions," continued Andry.

The trend of community mobility has also resulted in economic improvements in tourist destinations. This is reflected in the economy in the provinces of Bali and Nusa Tenggara which has gradually improved since the second semester of last year.

Meanwhile, the level of public confidence or public confidence level is improving, as shown by Public Expenditures excluding Food and Beverages. MSI data shows that the proportion of non-food and beverage spending has returned to above 10 percent (the average ratio before COVID-19).

"This shows that people are more confident that the economy will be better in the future so they are willing to spend outside of food and beverages," he explained.

This optimism is also in line with the growth of consumer credit in the industry. Referring to the Money Supply Analysis data released by Bank Indonesia (BI), consumption credit grew by 6.0 percent in March 2022. Supporting factors for economic growth were also supported by Government policies to encourage more equitable investment outside Java.

"Future development will not only focus on Java and western Indonesia, but also outside Java and eastern Indonesia. Regional economic growth performance shows that in the last five years, economic growth in the outer islands is much higher than that in the outer islands. Java's economic growth," said Andry.

In the long term, regional economic growth accompanied by income distribution between people outside Java and Java is expected to be better. Because that way, income inequality between the Outer Java region and the island of Java will also decrease so that it can encourage economic growth in the region.

According to Andry, the factors that will drive the regional economy will be triggered through more equitable infrastructure development, the development of new economic growth centers in Industrial Zones and Special Economic Zones that are spread evenly throughout Indonesia.

Apart from that, increasing penetration of the digital economy also needs to be intensified in order to further expand market access from production centers in the region and even abroad.