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ADB lowers Indonesia’s growth forecast for 2023, 2024
The multilateral bank has lowered its projections for Indonesia's growth this year and next due to global headwinds and continued normalization of consumer spending, a major contributor to GDP.
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Traders work at Tanah Abang Market in Central Jakarta in June 2020. (JP/Dhoni Setiawan)
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ndonesia’s economy is expected to grow 4.8 percent in 2023 and 5.0 percent in 2024, which would mark a significant slowdown from the 5.3 percent it achieved last year, according to the latest Asian Development Bank (ADB) assessment.
“Booming commodity exports drove growth to 5.3 percent in 2022, making up for modest domestic demand,” ADB country director for Indonesia Jiro Tominaga said on Tuesday as the multilateral development bank presented its Asian Development Outlook (ADO) April 2023.
Countries like Indonesia that rely strongly on commodity exports benefited from high prices in 2022 as economies reopened following the COVID-19 pandemic and drove up demand for metals, fossil fuels and other commodities. Meanwhile, the Russian invasion of Ukraine and other geopolitical developments disrupted the supply of some goods and also contributed to a rise in prices.
At the same time, Indonesia recorded a strong rebound in domestic consumer spending as mobility restrictions were gradually lifted, which fueled further acceleration of GDP growth.
Read also: Consumer spending insights from 2022 to early 2023
“Global headwinds in 2023 are projected to cut export growth, although the current account should continue to be close to balance. But because private consumption accounts for a large share of Indonesia’s economy, as consumer spending further normalizes and benefits from the tapering off of inflation, this should put a floor on growth. Investment, however, is likely to remain modest as businesses wait and see,” Tominaga added.
The report, which was published Tuesday, notes that Indonesia’s public finances improved as a result of last year’s solid performance: “The export boom generated windfall revenues that enabled Indonesia to cut the budget deficit below the statutory ceiling of 3 percent of [GDP], one year ahead of schedule.”
