By: Sentiaji Kurniawan)*
The World Bank is optimistic that Indonesia’s economic growth will continue to improve. This projection shows that the Government’s economic recovery program is on the right track.
Economic growth in Indonesia is certainly good news, the World Bank estimates that the Indonesian economy throughout 2021 will grow around 3.7 percent and will increase again next year to 5.2 percent.
According to the Director of the World Bank for Indonesia and Timor Leste Satu Kahkonen, next year’s economic recovery can be achieved if Indonesia does not experience a wave of Covid-19 and due to the emergence of new variants.
In addition, the World Bank also sees the risk of a new variant of the Omicron virus that has attacked several countries in the world, amid vaccinations that are still not evenly distributed, will have a weakening impact on the Indonesian economy next year.
The World Bank reminds that the economic recovery can take place optimally with the speed of Covid-19 vaccination, so that it reaches 70% of the population by the end of next year. Kahkonen said projections assume that vaccine launches will progress with most provinces achieving 70% vaccine coverage by 2022, and Indonesia will not experience a new severe wave of Covid-19.
He added that the uncertainty of the pandemic was still a challenge for all countries and even the term that Covid-19 had the potential to become endemic. Because Covid-19 won’t go away anytime soon.
On the other hand, the World Bank requested the direction of domestic fiscal monetary policy that remains accommodative and encourages economic growth next year. With the support of global trade growth and moderate increases in commodity prices amid tightening global financial conditions.
As is known, Indonesia’s GDP grew by 7.07 percent (yoy) in the second quarter of 2021 after four consecutive quarters of contraction since the second quarter of 2020.
Research Director of the Center of Reform on Economics (CORE) Piter Abdullah said that his party believes that in the fourth quarter of 2021 the economy can grow better. Although many views can repeat the achievement of growth in the second quarter of 2021, which is growing above 7 percent.
Previously, Indonesia’s economic growth slowed in the third quarter of 2021 to 3.51 percent (yoy). This is an implication of the Emergency PPKM policy and level 3-4 which is applied to handle the spread of the Delta variant in the country.
In the future, Piter assesses that the recovery process will continue. One of the indicators is that public consumption is expected to continue to improve. This can be seen from the October 2021 Consumer Confidence Index (IKK), which has returned to an optimistic level of 113.4. The IKK continued to increase from a pessimistic level in September 2021 of 95.2 and previously 77.3 in August 2021.
The real sales index also began to improve, although it briefly declined in the third quarter of 2021. So Indonesia’s economic condition is also very dependent on pandemic conditions. Therefore, Piter considered it important for Indonesia to avoid a third wave of the spread of Covid-19. Especially, the increase in cases triggered by the latest variant, namely Omicron.
Meanwhile, Governor of Bank Indonesia (BI) Perry Warjiyo emphasized that the central bank’s policy in 2022 will continue to be directed at supporting economic stability and growth. In addition to monetary policy, Perry said that macroprudential policies, the payment system, deepening of the money market, as well as an inclusive and green financial economy will also continue to be directed at encouraging economic growth.
On the global side, Perry said that global financial market uncertainty still persists amid the announcement of the Fed’s faster monetary policy tightening cycle, as well as the spread of the new Covid-19 variant.
According to Perry, this condition will have an impact on the limited flow of global portfolio investment to Emerging Markets, including Indonesia, as well as impact on the development of yields on Government Securities (SBN) and the rupiah exchange rate.
Therefore, the main focus of BI’s policy direction next year is to maintain the stability of the rupiah exchange rate. BI believes that the stability of the rupiah exchange rate is the most important thing for the Indonesian economy.
BI also did not hesitate to take stabilization steps to keep the rupiah exchange rate stable in order to support economic recovery. But still pay attention to market mechanisms.
The World Bank’s optimism for Indonesia’s economic growth is a positive thing that must be appreciated. This response also indicates that the Government’s hard work has won the trust of the international community.
)* The author is a contributor to the Pertiwi Institute
