Indonesia’ economic growth is expected to reach 4.5 percent in 2021 and 5.0 percent in 2022 amid improving global conditions and a gradual reopening of the economy - Photo by ADB Office

JAKARTA (TheInsiderStories) – Indonesia’ economic growth is expected to reach 4.5 percent in 2021 and 5.0 percent in 2022 amid improving global conditions and a gradual reopening of the economy, says the Asian Development Bank (ADB) report released today. While, developing Asia’ economic revival is underway, supported by a healthy global recovery and progress on vaccines.

“Despite the unprecedented nature of the crisis triggered by the COVID-19, Indonesia has done well in 2020, thanks to the well‑coordinated (and) well-communicated crisis response and strong leadership to contain the pandemic,” said ADB’ country director for Indonesia, Winfried Wicklein, in a statement.

He continued, “With a sustained trade recovery, a revival in manufacturing, and the large national economic recovery budget for 2021, we are optimistic Indonesia will return to its growth trajectory next year.”

The report says Indonesia’ private consumption is expected to rise in 2021, as vaccination picks up pace and more areas of the economy open up. Investment is expected to bounce back along with the brightened economic prospects. The pace of financing or credit recovery, however, will lag amid uncertain investor sentiment.

Inflation, which averaged 1.6 percent last year, is forecast to rise to 2.4 percent in 2021 and 2.8 percent in 2022. It will still be within the Bank of Indonesia’ target range, as inflationary pressure from currency depreciation and higher demand for food will be partially offset by lower prices of goods set by the government.

Net exports, supported by strong exports of commodities, will put the current account deficit at 0.8 percent of the gross domestic product (GDP) in 2021. As investment picks up next year, higher volumes of imported capital goods, such as machinery and tools, are expected to push Indonesia’s current account deficit to 1.3 percent of GDP in 2022.

ADB says, the global recovery could be derailed by threats of new coronavirus mutations, the uneven pace of vaccination across the globe, and unexpected global financial tightening. On the domestic front, the economic recovery could be slowed by a spike in COVID-19 cases during Ramadan, delays in the vaccination push, and weak revenue collection.

To sustain the recovery, the report recommends that Indonesia mobilize domestic resources and ensure environmentally friendly economic development. Concerns of a debt overhang can be addressed by fiscal reforms to broaden the tax base, improve tax administration and compliance, and plug tax loopholes. Promoting a green recovery will protect the environment and support economic growth and job creation.

Developing Asia

The agency also sees, the developing Asian’ growth is forecast to rebound to 7.3 percent in this year, supported by a healthy global recovery and early progress on coronavirus disease (COVID-19) vaccines. The projected resurgence follows a 0.2 percent contraction last year.

The region’ growth is forecast to moderate to 5.3 percent in 2022, excluding the newly industrialized economies of Hong Kong, China, the Republic of Korea, Singapore, and Taipei, developing Asia’ economic activity is expected to grow 7.7 percent this year and 5.6 percent in 2022.

Growth is gaining momentum across developing Asia, but renewed COVID-19 outbreaks pose a threat to recovery. Economies in the region are on diverging paths. Their trajectories are shaped by the extent of domestic outbreaks, the pace of their vaccine rollouts, and how much they are benefiting from the global recovery,” adds by the chief economist, Yasuyuki Sawada.

Rising exports are boosting some economies in developing Asia amid strengthening global economic activity, including a rebound in manufacturing. Progress on the production and delivery of COVID-19 vaccines has contributed to this momentum, but the pandemic remains the biggest risk for the region as potential delays in vaccine rollouts or significant new outbreaks could undermine growth.

Other risks include increasing geopolitical tensions, production bottlenecks, financial turmoil from tightening financial conditions, and long-term scarring—for instance, learning losses due to school closures. ADB rated, most economies in developing Asia will see healthy growth this year and in 2022.

Central Asian economies are forecast to grow 3.4 percent on average this year and 4.0 percent next year. The trade-dependent economies of Southeast Asia will also recover, with the subregion forecast to grow 4.4 percent this year and 5.1 percent in 2022 after contracting 4.0 percent in 2020.

It said, Pacific economies, still affected by global travel restrictions and a collapse in tourism, will post modest growth this year at 1.4 percent, before expanding by 3.8 percent next year. Strong exports and a gradual recovery in household consumption will boost economic activity in the People’ Republic of China in 2021.

The country’ gross domestic product (GDP) is forecast to expand 8.1 percent in 2021 and 5.5 percent in 2022. East Asia’ GDP is expected to grow 7.4 percent in 2021 and 5.1 percent in 2022. India’ economy, meanwhile, is expected to grow 11.0 percent in 2021, which ends on March, 31, 2022, amid a strong vaccine drive. However, the recent surge in COVID-19 cases may put this recovery at risk.

India’ GDP is expected to expand 7.0 percent in 2022. This year, South Asia’ GDP growth is expected to rebound to 9.5 percent, following a 6.0 percent contraction in 2020, before moderating to 6.6 percent next year. Inflation in developing Asia is projected to fall to 2.3 percent from 2.8 percent last year, as food-price pressures ease in India and China. The region’ inflation rate is forecast to rise to 2.7 percent in 2022.

The report also examines the costs of pandemic-induced school closures across developing Asia. Countries are using distance learning, but this is only partially effective as many students lack access to computers and the internet. These disruptions will affect the skills students acquire and, eventually, their productivity and earnings as future workers.

Learning losses range from 8.0 percent of a year of learning in the Pacific, where schools have mostly stayed open, to 55 percent in South Asia, where school closures have been longest. The present value of students’ future earning reductions is estimated at US$1.25 trillion for developing Asia, equivalent to 5.4 percent of the region’ GDP in 2020.

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