Economy
Indonesian economy to steadily grow over next two years: World Bank
Indonesia’s economy is expected to steadily grow over the next two years on the back of domestic consumption and investment despite weak exports, a World Bank report said Monday.
Household spending, traditionally a strong contributor to Indonesia’s GDP, and election-related spending helped to expand Southeast Asia’s largest economy 5.11 percent in the first quarter of 2024.
And it is expected to expand five percent overall this year, followed by 5.1 percent in 2025 and 2026, according to the World Bank’s Indonesia Economic Prospects report.
The latest projection was an increase from the Bank’s previous estimates of 4.9 percent this year and next, followed by five percent in 2026.
“The economy is expected to benefit from a pick-up in public consumption and investment but will face headwinds, notably from worsening terms of trade,” the report said.
It noted several risks to the economy, including high interest rates and geopolitical shocks, which could further weigh on exports already impacted by lower prices.
“The outlook is stable, but risks are tilted to the downside,” World Bank senior economist Wael Mansour told a news conference.
“Our baseline (projection) assumes continuity in policy, especially those linked to boosting investment.”
The latest projection assumes a large contribution from public consumption — with government spending expected to increase — while foreign direct investment as a share of GDP is projected to return to pre-pandemic levels, Mansour said.
He added that Indonesia’s “credible” fiscal rule had helped attract investments and lower Indonesia’s risk premiums.
But president-elect Prabowo Subianto, who will take office in October, is reportedly looking to increase the country’s debt-to-GDP ratio to 50 percent — from less than 40 percent — to fund his campaign promises including free school meals.
A member of Prabowo’s campaign team has denied the plan.
The government’s 2025 budget, due by October, is expected to outline an implementation plan for the new administration’s economic goals, and signal its fiscal policy stance.
On Sunday, June 30, the parliament approved the Tk 797,000 crore national budget for FY 2024-25, aiming for a 6.75 percent economic growth and keeping annual inflation around 6 percent.
Finance Minister Abul Hassan Mahmood Ali introduced the Appropriations Bill 2024, requesting a budget allocation of Tk 12,41,752 crore, which passed by voice vote.
Earlier, on Saturday, the parliament passed the Finance Bill 2024 with minor amendments.
The Finance Ministry proposed parliamentary approval for the appropriation of funds for necessary development and non-development expenditures. The concerned ministers justified their ministry’s expenses through 59 grant demands.
Parliament rejected 251 cut-motions from opposition members on these grant demands via voice votes. Seven MPs, including Jatiya Party’s Mujibul Huq and Hafiz Uddin Ahmed, and Independent MP Pankaj Nath, were allowed to discuss the Law Ministry, Secondary and Higher Studies Division, and Social Welfare Ministry.
Speaker Shirin Sharmin Chaudhury expedited the passing of grant demands for different ministries without a lunch break. Opposition and independent MPs present in the House did not object to the Appropriation Bill’s passage.
Vietnam’s economy grew by more than six percent in the first half of 2024, government figures showed Saturday, as analysts said more reforms are needed to further boost the economy.
The global manufacturing hub saw an expansion of 6.4 percent in January-June, compared to 3.7 percent over the same period of 2023, the General Statistics Office (GSO) said in a statement.
The upswing was the result of “several measures” taken to improve supply chains, the foreign exchange market and public investment, the GSO said.
Industrial production was up 7.5 percent, while foreign investment increased by 8.2 percent compared to the same period last year, the new figures showed.
To maintain and promote growth, the government needs to focus on the key sectors of manufacturing and processing, logistics and hospitality, VPBank Securities analyst Duong Thien Chi said.
Policymakers should also take into account “unmeasurable variables” such as the US Federal Reserve’s moves on interest rate reduction, Duong told AFP.
The United States was Vietnam’s largest export market in the first six months of 2024.
The Southeast Asian nation earned $190 billion from exports over that period, up by 14.5 percent year on year.
Despite such improvement, an International Monetary Fund analyst said Vietnam “needs a new wave of reforms” following a visit to the country late June.
“Increasing productivity, further investing in human and physical capital, and incentivising private investment in renewable energy is key,” said the IMF’s Paulo Medas.
Vietnam is targeting growth of between six and 6.5 percent this year, up on the 5.05 percent seen in 2023.
Crisis-hit Sri Lanka’s annual inflation almost doubled to 1.7 percent in June, up from 0.9 percent the previous month, as food prices began rising again, official data showed Saturday.
The Census and Statistics department data came days after Sri Lanka secured a deal with its bilateral creditors to restructure $10 billion in debt, a key condition to maintain an IMF bailout programme.
Food inflation returned, with prices rising 1.04 percent in the year to June, having been flat a month earlier, the department said.
At the height of Sri Lanka’s economic crisis when it defaulted on its foreign debt in 2022, inflation had risen to nearly 70 percent.
The Central Bank of Sri Lanka expressed hope on Saturday that it would be able to maintain overall inflation below 5.0 percent for 2024.
The country is due to hold a presidential election this year, and opposition parties have vowed to renegotiate the terms of the IMF bailout, which has led to painful austerity measures.
The IMF has said it is willing to listen to alternative proposals from rival political parties, but stressed that the benchmarks set in the bailout had to be adhered to.
