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World Bank sees stagnant FDI, slowdown in growth for Indonesia
In its latest projection for Indonesia's economy, the World Bank forecast a slowdown in gross domestic product (GDP) growth to 4.9 percent this year.
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A stage director looks on at the International Monetary Fund World Bank Annual Fall Meetings Plenary Session in Washington, DC, on Oct. 18, 2019. (AFP/Andrew Caballero-Reynolds)
T
he World Bank expects Indonesia’s economy to slow down this year as foreign direct investment (FDI) plays a smaller role in the country’s gross domestic product (GDP) than it did before the pandemic.
"The FDI in dollar and rupiah has been stable. It's not picked up or declined. But as a share of the economy, it has declined compared with before the pandemic. This is also reflective of the fact that the economy as the denominator has grown," World Bank senior economist Wael Mansour said in a press briefing on Friday.
In its latest Indonesia Economic Prospects (IEP) report, the World Bank forecasts that net FDI will increase to 1.3 percent of GDP this year, up from 1.1 percent last year. However, that is still below the 1.8 percent of GDP seen in 2019.
The World Bank also notes that FDI has been a steady source of external financing over the past three years amid more volatile and shorter-term portfolio and debt flows.
However, the investment opportunity in mature sectors, such as basic infrastructure and real estate, may have "been done," according to Mansour.
"We need to attract [foreign investment] for more complex sectors. It can be [downstream industries], new capital, health and telco. There are a lot of options," Mansour said.
Read also: Millions of Indonesians at risk of falling back into poverty, World Bank warns
