The Irreversible Trend: Part 2
In the final quarter of last year, Indonesia's economic growth accelerated as consumption perked up following the easing of anti-virus mobility restrictions and as higher commodity prices pushed exports to record highs. However, COVID-19 cases are currently rising again in Indonesia due to the spread of the Omicron variant. On Thursday (02/10), there has been a growing of 40,618 new coronavirus cases. Indonesia has already tightened social restrictions in a bid to contain a spike in coronavirus infections. Consequently, Bank Indonesia will start unwinding an easy monetary policy with hikes in banks' reserve requirement ratio beginning in March. The tightening is seen as preparation for U.S. rate hikes, which have roiled Indonesian financial markets in the past. Meanwhile, the value-added tax rate on most goods and services is set to rise in April as part of the government's fiscal normalisation policy. Export contribution to growth could also be curtailed by a ban on overseas shipments of coal in January and a newly implemented domestic sale requirement for some palm oil products.
Technological advancement and its usage are growing exponentially that the world had never seen before. The COVID-19 pandemic enforces the mass adoption of technology due to the virus preventive measures. This phenomenon expanded the untapped market for big enterprises and startups, thus creating more room for growth. Investors also see this as an opportunity to invest as early as possible in companies that acknowledge the current market demands and characteristics. Indonesia's capital market will undoubtedly see many technological startup companies IPOs in the near future. The growth of technology also boosts the number of investors in the capital market by making a low barrier of entry. In many cases, some companies' strengths to surpass their sector peers are tech-forward and asset-light business models propelled by tailwinds of growing demand, which became even more important during the crisis. The demand tailwinds were often directly driven by policy responses to the pandemic, such as lockdowns that changed consumer behaviour. Digital banking acceleration highlights the surge of technology usage in the financial sector, especially during the pandemic. When banks were forced to shut down face-to-face interaction with their clients, customers rapidly adapted to digital applications such as mobile banking. Although these changes have been going through for several years, the pandemic has accelerated the inevitable: the conventional banking industry is undergoing a seismic shift and will be digitised within the next five to seven years. BCG found that mobile banking usage grew by 34%, while banking at branches declined by 12%. As of now, young customers are increasing and willing to go all digital. While the future of conventional banks is full of uncertainties, they could evolve into better financial partners for customers by seeking opportunities in technology and fending off the challengers. In the end, conventional banks must realise that utilising technology will be advantageous.
With the pandemic setting its foot for the third year, the same question remains still: what's to come? Despite the uncertainty, market recovery has begun to emerge slowly but steadily in line with the worldwide vaccination progress and endemicity being the predicted endpoint of it all. By 2023, all advanced economies will have achieved a full output recovery, yet emerging and developing economies will remain 4% below their pre-pandemic trend. However, they will remain below in emerging market and developing economies (EMDEs), owing to lower vaccination rates, tighter fiscal and monetary policies, and more persistent scarring from the pandemic. The projected slowdown in output and investment growth is caused by several downside risks, from simultaneous Omicron-driven economic disruptions, decrease in inflation expectation, financial stress, and uncertain climate change. The United Nations forecast lower global economic growth in 2023,