Indonesia govt sets 5.3%-5.9% GDP growth forecast for 2023

  • Indonesia expects its economy to grow between 5.3% to 5.9% next year, above 2022’s 5.2% growth target, even as it gradually withdraws pandemic-era fiscal support and reinstates strict fiscal rules,its finance minister said.
  • The government will use this growth assumption to set 2023 spending plans, adding that the budget will be designed with a deficit of under 3% of gross domestic product, Finance Minister Sri Mulyani Indrawati said.
  • 2021’s fiscal deficit was 4.65% of GDP and 2022’s gap is seen around 4%, according to Sri Mulyani’s latest estimate.
  • For 2023, Indonesia’s traditional main growth engines, household consumption and investment, should accelerate, while the contribution of exports is seen declining, Sri Mulyani said.
  • “We have also identified new sources of economic growth,” she said, citing healthcare services as well as manufacturing of electronics, communication equipment, chemical and mineral processing as potential post-pandemic growth drivers.
  • Plans for low carbon developments and energy transition to renewables will also aid growth, she said, adding that the state budget will be geared to support these sectors.
  • However, the minister said policymakers would monitor the potential spillover impact from global monetary tightening, which could trigger capital outflows and push government bond yields up.

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