CORE Indonesia Forecasts 5 Percent Economic Growth in 2022

30 December 2021 17:44 WIB

TEMPO.CO, JakartaThe Center of Reform on Economics (CORE) Indonesia projects the country's economic growth will hover between 3.6 up to 4 percent and it is expected to grow higher in 2022 at around 4 to 5 percent.

"With the assumption that the pandemic is handled better and no more Covid-19 case spikes,” as stated by Core Indonesia in the press release on Thursday, Dec. 30.

CORE economist Akhmad Akbar Susamto views this year’s tax realization has exceeded the 2021 target set by the government, which is attributed to a better economic condition compared to the previous year. 

According to Susamto, the largest contribution is from value-added tax (PPN), which is sensitive to economic activities and the higher commodity prices during 2021. This helped the government’s tax revenue realization from oil and gas.

However, it is still considerably lower compared to the GDP. CORE urged the government to push for a higher economic growth.

Susamto said the potential for fiscal performance in encouraging economic growth will decline in 2022 due to the government's fiscal consolidation policy by reducing spending for Covid-19. Nevertheless, the realization of Law No.7/2021 concerning the Harmonization of Tax Regulations (HPP) could potentially encourage an increase in VAT and PPh.

In the monetary sector, CORE Research Director Piter Abdullah said policies of low interest rates to lending rates are still quite slow. This is indicated by the decline in lending rates which is slower than the decline in the benchmark interest rate. During 2020, for example, the benchmark interest rate has fallen by 150 bps, followed by a decrease in the deposit rate by 278 bps, while lending rates have only decreased by 117 bps.

"In fact, the reduction in loan interest rates is very important to accelerate economic recovery, especially improving people’s purchasing power who depend on bank credits," said Piter.

Read: Business Association Predicts Indonesia's Economic Growth below Govt Assumption

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