"Global commodity prices have dropped back since late last year, and we expect further falls over the coming months. Meanwhile, despite the rebound now underway in China, we expect global growth to struggle this year as the U.S. falls into recession."
Indonesia's exports grew on the back of soaring commodity prices last year, with shipments reaching a record high of $292 billion. The country is a major supplier of thermal coal, palm oil and nickel steel. STRONG CONSUMPTION Household consumption, which accounts for more than half of Indonesia's GDP, accelerated last year, especially supported by travel-related spending as COVID-19 restrictions eased.
Indonesia removed most movement curbs last year after daily cases dropped and vaccination rates rose, driving up household consumption. All remaining measures were lifted at the end of the year. Investment grew 3.87% last year, similar to 2021's growth but is yet to return to pre-pandemic levels, the statistics bureau said. Meanwhile, government spending in 2022 contracted as Jakarta started to ease back from pandemic-era health and social spending. This year's growth would likely be supported by household consumption amid continued improvement in people's mobility, Bank Mandiri economist Faisal Rachman said, predicting growth of 5.04% in 2023.
The recent tightening of monetary policy may drag on growth prospects, analysts said, although Indonesia's central bank has signalled that its rate hike cycle was ending as inflation has cooled. Bank Indonesia has raised its policy interest rate by 225 basis points since August. Myrdal Gunarto of Maybank Indonesia predicted that the policy rate will be kept at the current level of 5.75% until the end of 2023 to uphold growth. Jakarta has set a target of 5.3% for economic growth in 2023. (Reporting by Stefanno Sulaiman and Fransiska Nangoy; Editing by Jacqueline Wong)
