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LPEM UI study explains Indonesia's peculiar economic growth

Tempo - November 7, 2022

Moh Khory Alfarizi, Jakarta – A newly published analysis by the Social and Economic Research Institution at the University of Indonesia's Economy and Business School (LPEM FEB UI) explains that Indonesia's economic growth exceeds initial expectations after logging a 5.44 percent year-on-year growth in the second quarter of 2022. This is the second highest since 2013.

Macroeconomics Analysis Series Indonesia Economic Outlook 2023 on Monday stated that "Several factors have played a role in driving high growth in the second quarter of 2022."

One of the factors mentioned in the analysis is the domestic demand recovery momentum that is prolonged due to the lagging health recovery compared to other countries, which validates the low-base effect.

The second aspect mentioned is the Ramadan dan Eid al-Fitr events that drove consumption in the second quarter and contributed to the GDP by 53 percent and household consumption growth up to 5.51 percent year-on-year, which spiked from the 4.34 percent from the previous quarter.

Third, the surge in commodity prices due to rising geopolitical tensions and global economic recovery has benefited Indonesia as a net exporter of primary energy commodities. Tax revenue from exports performed especially in the coal and CPO sectors.

"Exports grew by 19.74 percent (YoY) and taxes minus subsidies increased by 39.42 percent (YoY), the highest net tax revenue growth rate since 2015," wrote LPEM UI.

Lastly, the aspects contributing to the economic growth are the government's decision to increase fuel subsidies and postpone raising fuel prices during the second quarter amidst rising global oil prices.

Source: https://en.tempo.co/read/1653951/lpem-ui-study-explains-indonesias-peculiar-economic-growt