Expert Comments on IMF Lowering Indonesia's Economic Growth Outlook
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27 July 2023 20:42 WIB
TEMPO.CO, Jakarta - The International Monetary Fund (IMF) lowered its projection for Indonesia's economic growth in 2024. An economist from the Center of Economic and Law Studies (Celios), Bhima Yudhistira, disclosed a number of causal factors.
In its July 2023 edition of the World Economic Outlook Update, IMF updated the global economic outlook, including Indonesia which will see a decline of 0.1 percent to 5 percent. The projection in April 2023 was 5.1 percent.
“One of them (causal factors) is the commodity prices that tend to decline in 2024 due to energy demand, and then the Ukraine war keeps proceeding,” Bhima told Tempo on Thursday, July 27, 2023.
In addition, Indonesia's main trading partners, such as the United States (US), China, South Korea, and Japan, are experiencing economic corrections. Several international institutions have revised the economic outlook of these countries, Bhima informed.
“There will definitely be impacts on two main indicators, namely net exports and direct investment,” he added, “That will affect Indonesia.”
Bhima also assessed that the general election is among the causal factors. The lower middle people will be benefited from the election because of its quite high expenses. Meanwhile, rupiah and foreign exchange savings of upper-middle-class people and private companies are still substantial, so there is likely a tendency to restrain expansion.
“Maybe this will be one of the indications that 2024 is a challenging year,” Bhima assessed.
Moreover, he went on, the rising trend of the US central bank or the Fed’s interest rate. If the interest rate rises, borrowing costs will be more expensive, causing credit growth to slow down. Investors get money from loans as well.
“So there are also external factors, such as interest rates that can affect project implementation, capital expenditure from companies, and then purchasing power and state tax revenues,” he explained.
According to him, there are many variables that will be affected because developed countries are still aggressive in raising interest rates. The effect will spread in 2024. “Based on what I observe, it is estimated that economic growth [of Indonesia] in 2024 will only be able to reach 4.9 percent year on year,” he said.
AMELIA RAHIMA SARI
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