THE GOVERNMENT must be wary of the decline in Southeast Asian economic growth projections by the Asian Development Bank (ADB). The reason is, this could have a significant impact on Indonesia.
“It is very possible that it could have an impact, especially from exports, because Southeast Asian countries, including Indonesia, depend heavily on two main destinations, namely China and America,” said Executive Director of the Center of Reform on Economics (CoRE) Mohammad Faisal when contacted, Thursday (26/9).
China’s economy, he continued, has not succeeded in recovering from the post-covid-19 downturn. The ‘Bamboo Curtain Country’ is facing a crisis in the property sector which is causing the economy to slow down. This also causes import demand to weaken.
Weakening Chinese consumption has an impact on Indonesia’s export performance. Faisal said that China has so far become Indonesia’s main trading partner. The weakening of China’s economy has had an impact on limited national export performance.
“Of course import demand is weakening and will affect the exports of Asian countries, including Indonesia. Indonesia’s dependence on exports to China is very high,” he explained.
While exports to China weakened, Indonesia’s imports from China actually strengthened. “Because of these conditions, export penetration into China is slow, growth is low. Meanwhile, imports are very high from China. We are now flooded with imported products also from China,” continued Faisal.
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He also said that the condition of public investment, which is projected to weaken, is something to be wary of. Moreover, this year Indonesia is in a government transition period. This situation has historically caused investment to stagnate as investors wait for policy certainty from the new government.
“Indonesia has entered a transition of government, this is at least holding back investors because of the change in leadership. They are waiting for what the policy direction will be,” said Faisal.
In the September 2024 Asian Development Outlook (ADO) report, Wednesday (25/9), ADB revised down its Southeast Asian economic growth projection by 0.1% to 4.5% this year. The cut in forecasts was based on a projected decline in public investment and a slower recovery in exports.
Nevertheless, ADB still maintains Indonesia’s economic growth projection of 5% this year and next year.
ADB also raised its 2024 economic growth forecast for the developing Asia and Pacific region to 5%, amid solid domestic demand and still strong exports.
“The region is expected to grow 5% this year, compared with a projection of 4.9% in April,” said ADB Chief Economist Albert Park. (E-2)
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