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Jokowi’s Statement on Indonesia’s Economic Status


President of Indonesia, Joko Widodo (Jokowi) targeted the nation’s economic growth to reach 5 to 5.5 percent in the 2022 State Revenue and Expenditure Budget Draft (RAPBN). "The economy is expected to grow at a rate of 5 to 5.5 percent in 2022. We will make every effort to achieve the aforementioned growth objective of 5.5 percent," he stated in the APBN Bill's Introductory Speech for the Fiscal Year 2022, along with the financial note, on Monday (8/14). As of now, the Indonesian government will strive to achieve the maximum growth target at the upper limit, which is 5.5 percent. However, they must remain vigilant because the pandemic circumstance remains uncertain until this time. To keep the pandemic under control and stimulate economic recovery as well as maintaining social welfare, all available resources will be employed. As a result of the execution of structural reforms, the economic growth rate implies an anticipated rebound that is relatively substantial, supported by investment and export growth. Jokowi remarked that the trade surplus, which reached US$2.1 billion in December 2020, is a positive trend that must be maintained. According to data from the Central Statistics Agency (BPS), the trade balance surplus was generated by the higher export value compared to the actual import value. Exports reached US$16.54 billion in December 2020, while imports amounted to US$14.44 billion. Throughout 2020, Indonesia's trade balance generated a surplus of US$21.7 billion, which is the highest in the prior nine years.


On the other hand, the impact of the pandemic situation forces the government to take immediate and “extraordinary” decisions. Perry Warijyo, The Governor of Bank Indonesia, said that the current account deficit in 2021 and 2022 is expected to reach the range of 1 to 2 percent of GDP. He optimistically states that the inflation rate this year and next year will be maintained in the range of 2 to 4 percent. Jokowi mentioned that the 2022 budget deficit is really significant to achieve fiscal consolidation. In 2022, the fiscal consolidation will be more focused on supporting the implementation of structural reforms, particularly the acceleration of human resource development by amending its health, social protection, and education. Furthermore, the 2022 budget deficit will be financed by utilizing all safe-and-carefully-managed financing sources along with maintaining fiscal sustainability. In the 2022 financial note’s draft, it is stated that the budget deficit will be financed by the government bonds of Rp993.3 trillion and loans of Rp17.7 trillion. Nonetheless, the amount of budget deficit proposed in the State Revenue and Expenditure Budget Draft (RAPBN) 2022 is larger than the agreement between the Budget Agency (Banggar) of the House of Representatives amounting, 4.8 percent of GDP.


All things considered, the announcement of the financial note and the 2022 State Revenue and Expenditure Budget Draft (RAPBN) has a substantial potential influence on the movement of the IHSG. Regina Fawzah, an analyst from Erdikha Elit Sekuritas, states several catalysts are needed to be monitored by investors, such as the financial note, RAPBN 2022, economic growth projection, inflation target, the interest rate of government’s bonds, etc. Moreover, as the government spending objective for 2022 is set apart at Rp2.71 trillion (+0.4% YoY), it is expected that the spending size will be much lower next year. This is due to the limited revenue sources and the government stance to keep the country’s debt ratio from increasing further. The current state budget proposal for 2022 appears to be based on top of the ongoing COVID-19 pandemic spread, which is likely to last within the year of 2022. Consequently, having a dynamic and conservative budget will aid the government in fine-tuning its fiscal policies in the event that the situation worsens in the future. The current conservative state budget proposal ought not to be harmful to growth prospects in 2022, as growth will depend on the utilization of private sectors, particularly households. Notwithstanding, it will rely upon the extension of the situation on COVID-19. Therefore, investors need to be cautious, monitor closely, and analyze the market movement thoroughly.


Sources :

Bisnis

CNN Indonesia

IDX Channel


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