GDP Growth Hits Ten-Year High
Indonesia saw 5.31 percent GDP growth in 2022, the highest in a decade, reported Statistics Indonesia (BPS). It was also a record high for President Joko Widodo’s administration. The figure largely met expectations from international agencies, even surpassing the government’s target of 5.2 percent.
Household spending remained the backbone of growth, contributing 2.61 percentage points to the overall GDP growth rate. This was followed by investments and net exports as the second and third biggest contributors, at 1.24 and 0.81, respectively. While household consumption grew moderately, incentives to increase capital injections and solid export performance were named as significant boosts to GDP growth.
As a political year for Indonesia, 2023 will be a "vitamin" for economic recovery, said Coordinating Minister for Economic Affairs Airlangga Hartarto. Political spending is expected to boost growth, especially in the last quarter of 2023. However, he also warned there are still challenges ahead from external factors such as a decline in economic growth due to geopolitical conflicts, which could weaken Indonesian exports. He said the government needs to remain vigilant and anticipate a potential global economic slowdown.
AmCham Economic Forum: No Recession, But Slowing Demand
AmCham Indonesia’s first Economic Forum of 2023 saw a timely discussion on the nation’s economic outlook, as Indonesia’s GDP growth reached a 10-year high of 5.31 percent in 2022. Held virtually today, Feb 8, the forum featured a detailed briefing by Bank Mandiri’s Chief Economist, Andry Asmoro.
Andry began with a presentation on the global economic outlook, highlighting inflation and the rising recession risk both globally and domestically. While risks related to the global economic slowdown, the 2024 election, and falling commodity prices are relatively measurable, the risks of geopolitical factors remain unpredictable. He predicted the domestic economy would not experience recession but expected slowing demand. Seeing how well the Indonesian government has managed the inflation rate, and how the domestic sectors support the growth of the national economy, Indonesia seems more resilient than most.
While unexpected circumstances might arise through the year, the government should be able to manage investment and manufacturing performances to keep economic growth on track, he said. The government and companies must work hand-in-hand to boost performance and ensure growth remains steady, especially if Indonesia aims to get out of the middle-income trap by 2043.
A busy Zoom chatbox saw the audience positive about the session, especially on how companies must overcome the challenges and cope with the economic situation. AmCham Indonesia would like to extend our thanks to all participants. We hope it was beneficial for offering insights on the current economic situation.
Coca-Cola Europacific Partners Inaugurates Rp 556b Recycling Factory
Coca-Cola Europacific Partners (CCEP) inaugurated its bottle recycling facility in Cikarang, West Java, Amandina Bumi Nusantara, today, Feb 8, as part of the company’s commitment to support the government’s sustainable programs in reducing plastic waste and supporting the circular economy.
In collaboration with Dynapack Asia, the beverage company established a 20,000 m2 facility to recycle polyethylene terephthalate (PET) plastic bottles with total investment of Rp 556 billion. The facility will implement closed-loop recycling, which would reproduce used plastic bottles and prevent them from becoming waste.
Inaugurating the factory, Coordinating Minister for Maritime Affairs and Investment Luhut Pandjaitan said supporting the environment can also be profitable, and this facility is a good example. Along with the inauguration, the company also established the Mahija Parahita Nusantara foundation to help improve the welfare of scavengers through various health and education programs.
Raw Material Importers Blame Commodity Balance for Delays
Manufacturers in Indonesia are still experiencing issues with imports under the new Commodity Balance system, as they have not been able to import since Dec 15, 2022, said Subandi, chairman of the Indonesian National Importers Association (GANSI). Therefore, operations in many factories are hampered, and those who are still operating are using materials imported before Dec 15, with supplies running low.
Subandi said the Commodity Balance system, a national database to track supply and demand in commodities as a basis for issuing import and export permits, is not ready for implementation at a technical level. Prolonged import processes cause delays in goods and raw materials entering Indonesia, and eventually have ripple effects including a halt in production, and layoffs. Obstacles to imports may also cause manufacturing exports to slump, as there are not enough raw materials for production.
The system poses new challenges in terms of process, transparency and data accuracy, said Associate Researcher at the Center for Indonesian Policy Studies (CIPS) Krisna Gupta. Similar to the Online Single Submission (OSS) system, the Commodity Balance system requires the integration of different ministerial systems for trade licenses, which is also the source of complexity in solving the issue.
Health Ministry Calls For Sweetened Beverage Excise Duty
The Ministry of Health has sent a written request for the Ministry of Finance to immediately release a policy on excise tax on sweetened beverages, due to increasing cases of diabetes, particularly among children and adolescents. Data from the Indonesian Pediatrician Association (IDAI) in January showed the prevalence of kids with diabetes had growth 70 times since 2010.
The government and the House of Representatives (DPR) Budget Committee (Banggar) had previously included the sweetened beverage tax in the draft 2023 state budget. However, the Director General of Customs and Excise Askolani said there are no plans to impose the excise just yet.
Minister of Finance Sri Mulyani Indrawati also said its implementation will depend on economic conditions this year. There are concerns that the policy may result in higher food and beverage prices, but Askolani said business players and economic growth are being taken into consideration in discussions.
'Catastrophe' if US Defaults on its $31.4t Debt
The US government risks “economic and financial catastrophe” if the House of Representatives fails to pass a bill to raise the $31.4 trillion debt ceiling, Treasury Secretary Janet Yellen said on Feb 6.
The US hit the statutory limit last month, but Republican members of Congress are using this to negotiate changes in federal spending rules with the White House before drafting a bill to raise the limit.
There will be grave consequences if the US defaults on its debt, International Monetary Fund (IMF) Managing Director Kristalina Georgieva said. The resulting economic pressure will be much greater than the US inflation rate, which is already at its highest level in four decades.
If the country fails to enact a bill to raise the debt ceiling, it will result in high taxes and interest rates, said Yellen. This will increase the possibility of a market crisis that is worse than the effects of US inflation and would affect both the US and global economies.
Speaker of the US House of Representatives Kevin McCarthy (Republican) urged US President Joe Biden (Democrat) to make concessions and accept budget cuts as soon as possible.
Siloam Performs 200th Kidney Transplant
Siloam Hospitals launched its latest flagship treatment to address the needs of patients for kidney replacement therapy in Indonesia on Jan 23. Supported by a multidisciplinary team of experienced and well recognized specialists, innovative kidney transplant technology and the clinical and operational management system of the Siloam Hospitals network, Siloam said in a release. Indonesians no longer need to go abroad to receive high quality kidney transplant services.
Siloam Hospitals have successfully performed more than 200 kidney transplant surgeries since 2017, with 41 percent of patients coming from Java Island and 59 percent from outside of Java. Siloam has achieved a success rate on par with international standards, the company said in a release.
Siloam Hospitals Vice President Caroline Riady said: “As the only private hospital actively performing kidney transplants in Indonesia, Siloam Hospitals Group looks forward to developing our capacity as a transplant center in the future using innovative techniques, clinical and research expertise, and a multidisciplinary approach to achieve high quality clinical outcomes.”
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AmCham Update is AmCham's regular newsletter on developments related to the pandemic crisis and other issues in Indonesia. It is edited by AmCham Managing Director A Lin Neumann and written by the AmCham Staff. Paul L Goddard is the Managing Editor.