Jakarta – The Asian Development Bank, or ADB, has revised up its growth forecast for Indonesia to 5.2 percent this year, reflecting the country's robust domestic consumption and windfall revenue from high global commodity prices.
The latest projection was 20 basis points higher than the multinational lender's previous forecast in April of 5.0 percent.
"Economic activity in Indonesia continues to normalize while Covid-19 infections remain manageable, despite a recent rise in the number of cases," Jiro Tominaga, ADB's country director for Indonesia, said in a statement Thursday.
Still, the supplement projected the largest economy in Southeast Asia would experience higher inflation this year at 4.0 percent, compared to ADB's 3.6 percent projection in April, due to high commodity prices.
"Inflation has risen, hurting households' purchasing power. However, high prices for key commodity exports are generating windfall export earnings and fiscal revenue, enabling the government to provide aid for costlier food, electricity, and fuel while still reducing the budget deficit," Tominaga said.
Indonesia's economy expanded 3.69 percent in 2021 after shrinking xx percent a year earlier due to restricted economic activities needed to curb the pandemic.
The country has so far managed to control the spread of Covid-19, with daily new cases averaged at 5,100 per day, far lower than its neighbors in the region.
Indonesia's 2022 growth acceleration was one of the highlights of the lender's Asian Development Outlook (ADO) 2022 Supplement, released Thursday.
It would be one of the few countries in developing Asia and the Pacific to shield itself from China's economic slowdown, advanced economies' aggressive monetary tightening, and the prolonged Russian invasion of Ukraine this year.
ADB lowered its economic growth forecast for developing Asia and the Pacific to 4.6 percent this year, from its previous projection of 5.2 percent.
"The economic impact of the pandemic has declined across most of Asia, but we're far from a full and sustainable recovery," ADB Chief Economist Albert Park said.
"On top of the slowdown in the PRC, the fallout from the war in Ukraine has added to inflationary pressure that's causing central banks around the world to raise interest rates, acting as a brake on growth. It's crucial to address all these global uncertainties, which continue to pose risks to the region's recovery," Park said.