In its December Asian Development Outlook report, the Asian Development Bank (ADB) maintained Indonesia's economic growth at 5% in 2023. Domestic demand is increasingly playing a role as a driver of growth.
Speaking at ADB's year-end briefing, ADB Indonesia Director Jiro Tominaga said on Thursday that the 5 percent growth rate is quite high in the global situation. Domestic demand has replaced commodity exports as the driving force of growth. As the export surge began to wane, domestic demand's contribution to growth returned to pre-pandemic levels.
Looking ahead, full normalization of liquidity, rising purchasing power, and falling inflation will re-stimulate spending.
Tominaga believes that Indonesia is recovering quickly from the pandemic. Between 2011 and 2019, Indonesia grew at an average rate of 53%, but in 2020 it fell to 21%。
Indonesia's GDP grew by 3 in 2021 thanks to timely, moderate, and bold macroeconomic policies7%, an increase of 5 in 20223%。In addition, in 2022, Indonesia regained its status as an upper-middle-income economy, based on the World Bank's estimates of nominal gross national income per capita.
Tominaga said Indonesia's post-pandemic mission is to increase economic growth to more than 6 percent. The Ministry of National Development Planning estimates that Indonesia's GDP must grow by at least 10% annually to become a high-income country by 2045. This is one of the challenges in the medium term ahead.
Therefore, he believes that Indonesia needs sustainable structural reforms that encourage human resource development and productivity, improve the business environment, and reindustrialize the manufacturing industry to drive growth.
On the other hand, he said that Indonesia's inflation rate has returned to the target range. As the commodity** shock recedes in 2022, headline consumer index (CPI) inflation will decline steadily and remain within the target range of 2% to 4% since May this year.
Assuming no global** shocks, ADB expects average domestic inflation to reach 36%。