Indonesia economy projected to remain resilient: WB

Indonesia's successful economic performance is largely thanks to the government’s strong macro-economic policy framework, which helps attract investment, World Bank (WB) director for Indonesia and Timor-Leste Carolyn Turk said on Monday.

In its latest report titled Indonesia Economic Prospect June 2024 edition, the WB stated that a prudent and consistent macro-economic policy framework has become the basis for the success of Indonesia's economic performance, which is recognised by the market.

The credit default swap rate and the JP-Morgan Emerging Market Bond Index (EMBI) spread for Indonesia have continued to decline since the Covid-19 pandemic and are lower than in several comparable countries, it said.

The credit rating agency has also maintained an investment grade rating for sovereign credit, including a stable outlook, so Indonesia succeeded in overcoming external shocks, attracting investment, and supporting growth.

According to Turk, it is important to maintain macro policies that are prudent, credible, and transparent while creating fiscal space that allows priority spending on social protection as well as investing in human capital and infrastructure.

The WB estimates that the Indonesian economy will grow resiliently at a stable pace in the coming years, driven by increased public spending, increased business investment, and stable consumer demand.

Indonesia's GDP growth is projected to reach an average of 5.1% per year from 2024 to 2026, despite facing rising obstacles from declining commodity prices, increasing volatility in food and energy prices, and growing geopolitical uncertainty, she said.

The country's GDP growth of 5.1% in the first quarter of this year remains strong and exceeds the average growth of middle-income countries. Private consumption reached 57% of the GDP growth, reflecting consumer confidence supported by falling non-food product inflation, rising wages for civil servants, and good consumer service performance.

Turk noted that public consumption strengthened again in the first quarter of 2024, driven by election and social spending, adding that this is a reason to boost the Indonesian economy despite a decline in net exports due to weak global demand and falling commodity prices.