Jakarta (VNA) – The Asian Development Bank (ADB) has projected that the Indonesian economy will return to high growth, last seen in the pre-pandemic era, in 2022, with the economy forecast to expand 5 percent next year.
The bank also projected a 4.5-percent economic growth for Indonesia for 2021.
ADB Director for Indonesia Winfried Wicklein said on April 28 that Indonesia passed 2020 well thanks to a well-coordinated and communicated crisis response, and strong leadership in tackling the pandemic.
Indonesia would return to its growth trajectory next year, driven by a sustainable trade recovery, a revival in the manufacturing sector, and a large national economic recovery budget for 2021, he added.
Household spending in Indonesia is expected to increase in 2021 as the vaccination programme advances and more economic sectors resume operations, he elaborated.
Besides, investment is expected to increase again with improving economic prospects, while the pace of recovery in finance or credit will still lag behind considering the uncertainty in investor sentiment, he said.
According to ADB estimates, inflation, which averaged 1.6 percent last year, will rise to 2.4 percent in 2021. This inflation rate will still be within Bank Indonesia’s target range as inflationary pressures due to currency depreciation and higher food demand will be partially offset by the decline in prices of goods set by the government.
Furthermore, net exports supported by strong commodity exports will result in a current account deficit of 0.8 percent of Indonesia’s GDP in 2021, according to the ADB.
As investment increases next year and volumes of imported capital goods, such as machinery and equipment, increase, Indonesia’s current account deficit is expected to reach 1.3 percent of the GDP.
Wicklein said there are several risks to this estimate, including disruptions to the global recovery due to the threat from coronavirus mutations, uneven vaccination rates in the world, and unexpected global financial tightening.
Meanwhile at home, economic recovery could slow if there is a spike in COVID-19 cases during the month of Ramadan, or on account of delays in vaccination efforts and weakening government revenues, he added.
Therefore, ADB has recommended that Indonesia mobilise domestic resources and ensure environmentally friendly economic development./.