Indonesia recorded solid economic performance

Jakarta (ANTARA) – After being hit by the COVID-19 pandemic, the world has found a bright spot with projected economic growth of 2.6 percent in 2024 despite global geopolitical tensions and global interest rates which are still high in the long term.

This growth was primarily due to the continued solid expansion of the US economy.

In 2025–2026, the global economy is expected to grow by an average of 2.7 percent, in line with strengthening trade growth and broad but measured easing of monetary policy to support economic activity.

However, the growth rate is well below the 3.1 percent average in the decade before COVID-19. Both developed and developing countries will grow more slowly compared to the decade before the COVID-19 pandemic, according to the World Bank’s latest Global Economic Prospects report.

Global growth in 2024–2025 will also be below the 2010 average in nearly 60 percent of countries, representing more than 80 percent of the global population. Amid increasing conflict escalation, prospects in many vulnerable countries remain weak.

Meanwhile, developing countries in 2024-2025 are projected to grow by an average of four percent, slightly slower than in 2023.

Additionally, global inflation is expected to slow to 3.5 percent in 2024 and 2.9 percent in 2025, although the rate of decline in inflation is slower than previously estimated.

China will grow more slowly in 2024 and even slower in 2025–2026, with cyclical challenges weighing on growth in the near term as the structural slowdown continues.

Except for China, growth in emerging market countries and developing countries is expected to increase to 3.5 percent in 2024 and then strengthen to an average of 3.9 percent in 2025–2026, in line with decreasing inflation, improving conditions finances, and increasing external demand.

Major challenges still face vulnerable countries, including low-income countries and countries facing high levels of conflict and violence, whose growth prospects are deteriorating.

According to World Bank Group Chief Economist and Senior Vice President for Development Economics, Indermit Gill, Indonesia and India are two countries that have strong economic performance.

Indonesia is projected to benefit from a growing middle class and generally prudent economic policies, with projected average economic growth of 5.1 percent over the next two years.

In addition, India’s economy has improved on the back of strong domestic demand, a surge in investment and strong services activity.

India is projected to grow at an average of 6.7 percent per fiscal year from 2024 to 2026, which could make South Asia the fastest growing region in the world.

This performance shows high growth, but can still be maintained even in difficult situations. Countries can increase their long-term growth by implementing policies that build human capital, increase productivity, increase the efficiency of public spending, and encourage more women to enter the workforce.

Solid growth

The World Bank revised its projection for Indonesia’s economic growth in 2024 to five percent from the previous estimate of 4.9 percent by taking into account the upward revision of global economic growth predictions, especially for the United States and China, which are Indonesia’s main trading partners.

In particular, the World Bank estimates that Indonesia’s economic growth will be solid because it is supported by the growth of the middle class and economic policies that tend to be extra cautious or prudent.

The World Bank also revised upwards its projection for Indonesia’s economic growth in 2025 to 5.1 percent, an increase of 0.2 percentage points from the previous projection. Likewise, Indonesia’s economic growth in 2026 is also projected at 5.1 percent.

According to the Chairman of the Board of Commissioners of the Financial Services Authority (OJK), Mahendra Siregar, Indonesia’s financial services sector is also maintained in a stable condition.

The continued stability of the financial services sector is supported by strong capital levels and adequate liquidity amidst global uncertainty due to high geopolitical tensions, the potential for widespread trade wars, and global economic performance that is still below expectations.

Indonesia’s economic growth in the first quarter of 2024 was 5.11 percent (year-on-year/yoy).

In terms of projections, gross domestic product (GDP) growth in most countries in the Asia-Pacific region (except China), including Indonesia, Malaysia and the Philippines, will be supported by strong private sector growth, low inflation, falling borrowing costs and conditions strong labor market.

Bank Permata Chief Economist Josua Pardede stated that Indonesia’s economic growth in 2024 will still be around 5 to 5.1 percent, in line with projections from the World Bank and the International Monetary Fund (IMF).

However, there is still a risk of a decline in economic growth, especially the public consumption component, where this figure is still below national growth in line with the potential for a decline in people’s real income amidst the increase in the cost of living, especially for middle class people. people.

For this reason, the condition of consumers who tend to hold back on spending has the potential to affect the sales performance of business actors.

The government needs to focus on efforts to prevent a significant increase in people’s living costs and be careful in adjusting the prices of goods or services it regulates, such as fuel oil, liquefied petroleum gas (LPG), and electricity.

Apart from that, plans to adjust plastic excise rates and excise on packaged sugary drinks, which are also expected to increase people’s cost of living, also need to be watched out for.

Therefore, the government must manage the momentum so that people’s purchasing power does not decline in line with plans regarding the prices of goods or services that it regulates, as well as encouraging food price stability which can also have an impact on the economy. people’s purchasing power.

Apart from that, the government must encourage quality economic growth that is capable of absorbing large numbers of workers, so that it has the potential to increase people’s real income and reduce unemployment and poverty rates.

By increasing people’s real income, it is hoped that consumer optimism and people’s purchasing power will increase and ultimately support solid economic growth.

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Editor: Rahmad Nasution
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