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Indonesia is Strong in Facing Economic Pressure, Foreign Enthusiastic to Investment

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By: Deka Prawira)*

The Covid-19 pandemic, which has been exacerbated by the Russia-Ukraine conflict, has put strong pressure on the world economy. Nevertheless, it is believed that the Indonesian economy is still strong enough to face these pressures, so that foreign investors remain enthusiastic about developing their business in Indonesia.

Even though the economy is currently still recovering, Indonesia is still a country that is quite resilient in dealing with conditions including external pressures. This is evidenced by Indonesia’s deficit which is always below 3% of Gross Domestic Product (GDP) and the state debt is below 30% of GDP.

Indonesia’s economy in the first three months of this year also grew 5.01% year-on-year (yoy), which was higher than other major countries, such as China at 4.8%, the United States at 4.29%, Germany 4 %, Singapore 3.4% and South Korea 3.07%.

Not only that, Indonesia’s current account will consistently experience a surplus in 2022. The International Monetary Fund (IMF) predicts that Indonesia’s surplus can reach up to 3% of GDP.

Indonesia’s investment realization in 2021 also grew 9% when compared to 2020, which reached Rp. 901.02 trillion, of which the figure above is the target proclaimed by President Joko Widodo, which is Rp. 900 trillion. The business world is also optimistic that the Indonesian economy will continue to grow, despite the threat of a crisis, high inflation, and rising food and energy prices.

The Indonesian economy is also predicted to still grow 5.1% this year or an increase from 3.7% in 2021. Indonesia is considered able to escape the impact of the global recession due to the brilliant performance of commodity exports.

However, according to Arsjad Rasjid as General Chair of the Indonesian Chamber of Commerce and Industry (KADIN), these efforts require stability. Through the Presidency B20/roadshow B20, Kadin promotes business opportunities in Indonesia to foreign investors to invest in Indonesia.

Arsjad said, seeing the positive enthusiasm, it would certainly be a golden opportunity for Indonesia to be able to accelerate the national economic recovery. All parties must take advantage of it as well as possible because the opportunity will not come twice.

Kadin as a strategic partner of the government, together with all Indonesian business actors, are committed to uniting to face economic conditions for the welfare of the Indonesian people.

He further said that Kadin also encouraged Micro, Small and Medium Enterprises (MSMEs) to go digital by holding workshops or training. Kadin has also coordinated a lot in the development of e-catalogs in order to promote local business actors by inviting them to onboard into the electronic catalog system, as an effort to support the import reduction program by 2023 to 5% at the latest.

Arsjad emphasized that this is because by increasing the production of local products, it can expand job opportunities so that it can reduce the number of unemployed in Indonesia.

We also need to know, as the Covid-19 pandemic is under control, global challenges and risks have shifted towards increasing commodity prices, heating up geopolitical tensions, and accelerating US monetary tightening. In addition, persistent supply disruptions, as well as rising inflation and limited global liquidity have further added to the downside risk to the outlook for the global economy.

Although the global growth projection is corrected significantly, Indonesia’s economic growth outlook is still quite strong. The World Bank predicts Indonesia’s economic growth in 2022 and 2023 at 5.1 percent and 5.3 percent, respectively, while the IMF predicts Indonesia will grow 5.4 percent and 6.0 percent in the same period. Indonesia’s Manufacturing PMI in May continued to expand although it slowed down compared to the previous month. However, public consumption is getting stronger and supports economic recovery. The 2022 state budget until the end of May has recorded an increasing surplus due to good revenue performance.

Investment financing is also continuously encouraged to increase asset value and benefits. The disbursement of investment financing allocation is carried out based on a performance analysis and urgency so that it is disbursed according to the needs of the investment recipient and is accompanied by Key Performance Indicators related to investment to increase accountability and accountability.

Indonesia has various advantages, especially in facing the threat of an economic recession that is currently engulfing the world. Therefore, entrepreneurs are encouraged not to hesitate to invest and develop their capital in Indonesia.

)* The author is a contributor to the Pertiwi Institute

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