Moh. Khory Alfarizi, Jakarta – Pricewaterhouse Coopers Indonesia or PwC Indonesia released its latest report on the Indonesian economic outlook for 2023. Head of Economic and Research, Denny Irawan, said that the multinational professional services company projected Indonesia's economic growth in Indonesia will decelerate this year compared to 2022.
"We project Indonesia's economic growth at 4.8 percent in 2023 with a 4.0 percent inflation rate. This projection is above the upper limit of Bank Indonesia's inflation target of 2.0 to 4.0 percent," he said in a press conference on Thursday, March 9.
In 2022, Indonesia's economy grew by 5.31 percent.
Denny said that the decline in growth will mainly be caused by ongoing inflationary pressures. Expectations of high inflation and the government's aggressive monetary policy tightening have the potential to reduce household consumption and erode business profitability this year.
Additionally, a slowdown in export growth is very likely to occur along with the slowing global growth, even though Indonesia's main commodity exports – coal, palm oil, and nickel – will be well maintained despite the ongoing war in Ukraine.
"Risks of decline in the medium run – including weak global demand, capital outflows, currency pressures, and tight global financial conditions – have the potential to hinder growth momentum from 2025 and onwards," he said.
However, PwC Indonesia estimates that the government's budget will remain strong in 2023. "We estimate the government will be able to continue pro-growth and pro-job creation programs, as well as subsidies programs, to protect consumption and control inflation," Denny said.