Three International Institutions Predict Indonesia's Economic Growth to Slow in 2023

Several international institutions have released reports on Indonesia's 2023 economic projections. Generally, the projections indicate a slowdown.

In its December 2022 edition of the *Asian Development Outlook*, the Asian Development Bank (ADB) estimates that Indonesia's economy will grow by 5.4% this year, but will slow down to 4.8% next year.

"In 2022, Indonesian household consumption continued to grow, exceeding pre-pandemic levels. The boom in primary commodity exports continued, and there was a recovery in tourist visits. However, in 2023, growth will be hampered by slowing goods exports, in line with the weakening economies of developed countries," said the ADB.

A similar forecast was issued by the Organisation for Economic Co-operation and Development (OECD). This organization, comprising dozens of developed countries, predicts that Indonesia's economy will grow by 5.3% in 2022, then fall to 4.7% in 2023.

"Rising commodity prices and strong investment flows helped Indonesia counter global economic challenges. However, domestic demand and household consumption growth were constrained by inflation," they stated in the November 2022 edition of the *OECD Economic Outlook*.

The OECD also identified several risks that could hinder Indonesia's economic growth in the future.

"Energy, fertilizer, food, and social tensions ahead of the 2024 elections are major risks. Monetary policy must remain tight, while support for vulnerable households must be maintained," they advised.

Not only the ADB and OECD, but also the International Monetary Fund (IMF), in its October 2022 edition of the *World Economic Outlook*, projected that Indonesia's economy will slow from 5.3% in 2022 to 5% in 2023.

The IMF also warned of risks that could push inflation higher next year, particularly in the energy and food sectors.

"Energy prices will remain highly sensitive to the war in Ukraine and the potential for other geopolitical conflicts. Extreme weather events could disrupt global food supplies, driving up the prices of staple foods and having dire consequences for poor countries," said the IMF.

However, not all projections are gloomy. In its October 2022 edition of the *East Asia and the Pacific Economic Update*, the World Bank actually forecasts that Indonesia's economy will remain stable, with growth at 5.1% in both 2022 and 2023.

Nevertheless, the World Bank still cautioned about risk factors for economic slowdown, ranging from declining demand for commodity exports to interest rate hikes in other countries that could trigger capital outflow and increase the burden of foreign debt payments.