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Indonesia's Economic Promise vs. Reality

In the realm of politics, it is not uncommon for us to see presidential candidates making promises they can never truly keep. This is especially the case when Indonesian presidential candidates promise to achieve a 7% growth rate which appears to be facing scrutiny. Recent analyses suggest that such an ambitious target is likely unattainable given the current economic climate. The Asian Development Bank (ADB) projects that the Indonesian economy will see a more moderate growth of 5.0% in 2024, a deceleration from the 5.3% growth experienced in 2022 due to booming commodity exports. This slowdown in growth is attributed to the fall off of commodity booms and the normalization of domestic demand. 


The World Bank shares stats that align with this perspective, expecting growth to moderate to 4.9% in 2023, down from the previous year's performance, according to The Economist. Both institutions highlight various challenges, such as the lasting effects of the pandemic on the labor market and potential growth, as well as the need for government interventions to mitigate inflationary pressures and support consumption.


Furthermore, trade restrictions and high tariffs will continue to pose challenges to economic growth. For example, in 2021, according to the International Trade Administration, Indonesia's average Most-Favored-Nation (MFN) applied tariff rate for agricultural products was around 8-8.7%, reflecting a broader trend of increasing tariffs over the past decade, which could impede trade liberalization and economic expansion. 


Given this context, the 7% growth rate promised by presidential candidates stands in stark contrast to the more conservative projections by economic experts. The current economic indicators, historical growth rates, and external economic pressures suggest that achieving such rapid growth would require significant policy shifts, economic reforms, and favorable international conditions, which at present, seem challenging, amidst all the challenges they are facing. 


The future of Indonesia's economic landscape remains a complex mix of domestic policies, global economic trends, and political promises, all of which will require careful navigation to promote sustained and inclusive growth.


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