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IMF-World Bank Meeting: Indonesia’s Robust Economic Virtue

The International Monetary Fund and World Bank initiated their Spring Meeting in Washington, D.C., on Monday (4/10). Subsequently, the latest World Economic Outlook report was published, updating a few details about the economic growth. Its contents indicate that the global economy remains far from achieving the same growth rates as before the COVID-19 pandemic. The baseline forecast predicts that the growth rate will decrease from 3.4% in 2022 to 2.8% in 2023 before stabilizing at 3.0% in 2024. Advanced economies are expected to experience a significant decline in growth, from 2.7% in 2022 to 1.3% in 2023. In addition, the occurrence of heightened stress in the financial sector could lead to a scenario where the global growth rate falls to around 2.5% in the same year, and the growth rate in advanced economies dips below 1%. The IMF released its Article IV report in mid-March, revising Indonesia's economic growth target for 2023 from an earlier estimate of only 4.8% to 5%. Meanwhile, the World Bank raised its projection for Indonesia's economic growth from 4.8% to 4.9%. The IMF considers that the risks to Indonesia's economy are fairly balanced. Positive factors for the Indonesian economy, such as China's recovery and easing global inflation pressures, could strengthen the demand for Indonesian exports. The World Bank has stated that high inflation can decrease private-sector consumption. At the same time, high-interest rates and uncertainty in external economic factors can hinder private investment growth.

According to The International Monetary Fund's (IMF) recent analysis, several factors have contributed to the global economic slowdown. One of the major reasons for the economic slowdown is the unexpected persistence of inflation. This area of economic slowdown is mostly concentrated in the United Kingdom and the European area, with economic growth expected to decline to 0.8% and –0.3%, respectively, before recovering to 1.4% and 1%. During a recent press conference, Mr. Gourinchas, Economic Counsellor and the Director of Research of the IMF highlighted the inflation deceleration, adding 0.6% from the January update. Aside from that, last year's rapid tightening of monetary policy has caused big losses on long-term fixed-income assets, raised funding costs, and deleteriously impacted banks' bottom lines. The recent collapse of the banking sector in the West also plays a role in the slowdown of the global economy. In their latest report, the IMF proves the high stakes of fluctuation with the unsettled financial sector. Despite the challenging economic environment, the IMF maintains a balanced outlook for Indonesia's economy, as they projected Indonesian economic growth to be 5%, despite it being 4.8% before. Various factors, including a fast recovery in China and easing global inflationary pressures, are expected to drive demand for Indonesian exports.

Indonesian Minister of Finance, Sri Mulyani Indrawati was spotted joining the summit to address the recent developments in the global economy. During the Spring Summit, several revisions were made to set the upcoming Indonesia Economic outlook higher than the preceding. This renewed projection represents a 0.2% increase compared to January 2023, maintaining below 5%. Regardless of the rise, the IMF projection is still considered to be much lower compared to what both the Indonesian Government and Bank Indonesia have projected for Indonesia's economic growth. Sri Mulyani added that the meeting emphasized economic downturns, food and energy security, financial stability, and interest rate policies of various countries. While collective economic growth steadily increased, The Indonesia Stock Exchange (IDX) experienced the contrary. On Wednesday (4/12), Indonesia Composite Index (ICI) opened with a 0.27% gain at Rp6,829.42 before descending 0.12%, turning for Rp6,803.27. According to Faisal Rachman, Bank Mandiri economist, Indonesia's economic growth in 2023 is expected to shift from the external sector to the domestic sector due to unfavorable global economic conditions. This shift is bound to occur as Indonesia looks to rely less on exports and more on domestic consumption and investment to drive its economic growth. The aforementioned movement is expected to make Indonesia's economy more resilient and less dependent on external factors beyond its control.

Sources: CNN

International Monetary Fund

United Nations

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