ASIATODAY.ID, JAKARTA – The Organization for Economic Cooperation and Development (OECD) emphasizes that the Indonesian economy is stable and confident in 2024 and 2025.
The OECD projects that Indonesia’s economy will grow 5.1% in 2024 and rise 5.2% in 2025.
In the May 2024 edition of the Economic Outlook report released Thursday, May 2 2024, the OECD estimates that Indonesia’s gross domestic product will grow 5.1% in 2024 and 5.2% in 2025.
“Domestic demand remains driven by private consumption and growth in gross fixed capital formation will strengthen in 2024 and 2025,” wrote the OECD in its report.
The OECD estimates that inflation will fall to below 3% in 2024 and remain unchanged in 2025. This projection is still within Bank Indonesia’s (BI) inflation target of 1.5%-3.5%.
Increased global uncertainty and lower commodity prices have reduced merchandise exports in nominal terms. Even though the current account deficit is increasing, foreign exchange reserves are expected to stabilize.
The OECD said that after BI raised its benchmark interest rate in April 2024, which was triggered by the weakening of the rupiah exchange rate, monetary policy easing is projected to begin at the end of 2024, as disinflation continues.
Meanwhile, fiscal policy is expected to remain expansionary while remaining below the deficit limit of 3% of gross domestic product, in line with the new Prabowo–Gibran government in October 2024, which is committed to increasing social spending.
“Long-term fiscal sustainability will be helped by further broadening the tax base and improving tax compliance as well as efforts to ensure efficient government spending, including through focused support for vulnerable households,” wrote the OECD.
Investment grew slopingly in the second half of 2023 while public consumption fell, but private consumption growth remained stable. Net trade contribution also increased, reflecting strong exports. Meanwhile, the OECD maintains its 2024 global economic growth projection at 3.1% and will increase slightly to 3.2% next year.
This projection is higher than the projection in the February 2024 report of 2.9% for 2024 and 3% in 2025. The faster-than-expected decline in inflation provided the basis for major central banks to initiate interest rate cuts in the second half of the year while also encouraging a rise in consumer incomes.
However, the OECD warned the speed of recovery differed greatly across regions. The OECD said that sluggish European and Japanese economies were offset by accelerating US economic growth.
The OECD raised its forecast for US economic growth to 2.6% this year from its previous estimate of 2.1%. In 2025, US economic growth is expected to cool to 1.8%, up slightly from 1.7% in February.
The OECD also increased its forecast for China’s economic growth to 4.9% in 2024 and 4.5% in 2025, up from 4.7% and 4.2% in its February 2024 outlook. (ATN)
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