Home News ADB Projects Indonesia’s Economy to Grow 5.3 Pct on Investment, Consumption

ADB Projects Indonesia’s Economy to Grow 5.3 Pct on Investment, Consumption

Developing Asia will barely grow in 2020 as containment measures to address the COVID-19 pandemic hamper economic activity and weaken external demand, according to a new set of forecasts from the Asian Development Bank - Photo by ADB

JAKARTA (TheInsiderStories) – Indonesia’s economy is predicted to expand by 5.3 per cent in 2018 and 2019, thanks to the expected accelerated in investment and stronger household consumption, the Asian Development Bank (ADB) said in its flagship annual economic publication released on Wednesday (11/04).

The ADB’s Asian Development Outlook (ADO) 2018 highlighted strengthening investment has improved the quality of growth in Indonesia. Higher capital spending from the government to address the infrastructure gap also offers growth stimulus.

Meanwhile, investment is expected to increase, as the government’s continued structural reforms and fast-tracking of several key infrastructure projects are received positive feed-backs from the business community.

“Indonesia’s strong macroeconomic management and structural reforms have boosted the investment momentum,” Winfried Wicklein, ADB’s Country Director for Indonesia said the statement.

“With continued reform efforts, the country can reach a higher and more inclusive growth.”Indonesia’s economy grew 5.1 per cent last year, driven by higher export growth, stronger investment, as well as private consumption. Low inflation and a significant job growth, including about 1.5 million manufacturing jobs alone, helped spur the country’s growth.Inflation averaged 3.8 per cent last year and is forecast to stabilize this year, before edging up slightly to 4.0 per cent in 2019, the ADB projected.

“This should support consumer confidence and help to sustain household spending and real income this year and next,” the ADB said in the statement.

Furthermore, a pickup in global trade and higher international commodity prices last year has helped Indonesia to see its current account deficit narrowing to 1.7 per cent of Indonesia’s gross domestic product.

Moderate Export Growth

The ADB projected export growth to moderate this year while imports will likely remain strong, buoyed by demand for capital goods.

The current account deficit is therefore expected to widen moderately in 2018 and 2019, the report says.

The ADO also cited some risks to Indonesia’s economic outlook. This include the pace of monetary policy developments in advanced countries and international trade tensions.
“Domestically, the economy could face potential revenue shortfalls and expenditure delays,” the Manila-based lender said in the statement.

Technology Affects Jobs

The ADO also offers a special theme chapter, as it highlighted on how technology affects jobs in Asia. It points out that while some of the region’s jobs will be eliminated through automation, new technologies will also help create jobs.

The report says policymakers will have to be proactive if the benefits of new technologies are to be shared widely across workers and society.

“This will require coordinated action to pursue education reforms that promote lifelong learning, maintain labor market flexibility, strengthen social protection systems, and reduce income inequality,” the ADB said.

“The key challenge for the Indonesian government and businesses is to capitalize on the opportunities while mitigating risks from new technologies,” Wicklein said in the statement.

“Toward this end, ADB is pleased to support the government in gearing up for the challenges ahead, such as researching the impact of disruptive technologies on the macroeconomy and selected sectors, such as manufacturing, finance, energy, e-commerce, and urban development.”

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