The Indonesian Economy in Turbulent Times

ABSTRACT

The year 2022 got off to a relatively optimistic start for Indonesia’s economic managers. Notwithstanding the serious health and social outcomes inflicted by the Covid pandemic, the government had successfully minimised the economic fallout. It could reasonably contemplate a period of sustained economic recovery and rising prosperity in preparation for the 2024 national elections. However, the outlook began to deteriorate in the face of heightened global economic volatility and uncertainty the economic and geostrategic ramifications of the Ukraine War, a sudden slowdown in the global economy, rising interest rates, historically high and volatile prices for some key commodities, international trade and transport disruptions, uncertainty about China’s current economic trajectory and persistent if (so far ) manageable Covid challenges. Nevertheless, the Indonesian economy is continuing its steady post-Covid progress the return to 5% growth in late 2021 continued through to second quarter 2022, inflation remains moderate and living standards are slowly recovering. However, there are potentially major macroeconomic challenges on the horizon. In fiscal policy, there are many demands on the budget, yet there is limited fiscal space, and much of the increased budget revenue this year is again being allocated to subsidies. In monetary policy, there is concern that, as in many countries, the monetary authorities could be ‘behind the curve’ of rising inflationary pressures. In his 16 August 2022 speech, President Joko Widodo (Jokowi) emphasised the importance of the industrial sector and of ‘downstreaming’ as a means of accelerating industrial growth. Against this backdrop, and the sector’s sluggish growth for much of this century, the paper also surveys recent patterns of industrialisation and prospects for the future.AlternatePara pelaku ekonomi Indonesia memulai tahun 2022 dengan optimisme. Tanpa mengesampingkan dampak serius kesehatan dan sosial yang diakibatkan oleh pandemi Covid, pemerintah telah berhasil meminimisasi keruntuhan ekonomi. Pemerintah dapat berfokus pada pemulihan ekonomi secara berkelanjutan dan peningkatan kemakmuran sembari menyongsong Pemilihan Umum 2024. Namun demikian, prospek ekonomi kembali memburuk di tengah naiknya gejolak ekonomi global dan ketidakpastian ramifikasi ekonomi dan geostrategi dari perang di Ukraina, perlambatan mendadak perekonomian global, kenaikan suku bunga, tinggi dan bergejolaknya harga barang bagi beberapa komoditas utama, disrupsi perdagangan internasional dan transportasi, ketidakpastian mengenai arah ekonomi China dan persistensi tantangan-tantangan Covid. Perekonomian Indonesia meneruskan pertumbuhannya yang stabil pasca Covid kembalinya pertumbuhan ke tingkat 5% pada akhir 2021 terus berlanjut ke Triwulan II – 2022, inflasi realtif rendah dan tingkat kelayakan hidup mulai pulih kembali. Namun, ada potensi tantangan makroekonomi besar di depan mata. Pada kebijakan fiskal, terdapat banyak permintaan untuk belanja, namun hanya sedikit ruang fiskal, dan banyak kenaikan penerimaan anggaran tahun ini dialokasikan untuk subsidi. Pada kebijakan moneter, terdapat kekuatiran bahwa otoritas moneter berada di belakang kurva kenaikan tekanan inflasi, sebagaimana terjadi juga di banyak negara lain. Pada pidato di 16 Agustus 2022, Presiden Joko Widodo menekankan pentingnya sektor industri dan hilirisasi sebagai alat akselerator pertumbuhan industri. Dengan latar belakang ini dan lambatnya pertumbuhan sektor industri sepanjang abad ini, tulisan ini juga mensurvei pola industrialisasi terkini serta prospek masa depannya.