IMF Lowers Indonesia's 2022 Economic Growth Forecast to 5.4%

The International Monetary Fund (IMF) has again lowered its projection for Indonesia's economic growth in 2022. The IMF projects that Indonesia's economic growth this year will reach 5.4% (year-on-year/yoy).

This downward revision is the second; last January, the IMF estimated that Indonesia's economy would grow by 5.6% (yoy) in 2022, lower than its previous estimate in October 2021 of 5.9% (yoy).

The IMF assesses that the Covid-19 pandemic has triggered a decline in Indonesia's economy and caused lasting impacts. The spread of the Omicron variant in Indonesia will hinder economic growth in the first quarter of this year.

However, recovery will continue in the second quarter, driven by the gradual easing of mobility restrictions, continued policy support, and a favorable global commodity market.

Furthermore, Indonesia's economic growth is also influenced by tighter global financial conditions. This tightening is in line with higher-than-expected global inflation, prompting central banks to tighten monetary policy earlier than expected.

On the other hand, the IMF assesses that Indonesia's economy will strengthen during 2022-2023. This is driven by rising global commodity prices, the easing of activity restrictions, continued policy support, increased mobility, and the expansion of the vaccination program to remote areas.

The IMF projects that Indonesia's economic growth will reach 6% in 2023. This projection is unchanged from the IMF's release at the beginning of 2022.