President: Be Alert, but Not Pessimistic

President Jokowi said that the global uncertainty should not make us pessimistic. In the last eight years, we have established important capital to create a more conducive development ecosystem.

KOMPAS/RONY ARIYANTO NUGROHO

President Joko Widodo salutes the audience after delivering the State Speech at the Annual Session of the MPR RI Joint Session of the DPR RI and DPD RI at the DPR RI Building, Jakarta, Tuesday (16/8/2022).

JAKARTA, KOMPAS — The government must be vigilant, as the risk of global economic uncertainties is expected to remain high. The slowdown in the global economy has the potential to affect the country’s economic growth. However, global uncertainties should not make Indonesia pessimistic.

President Joko “Jokowi” Widodo made the statement in his State of the Nation address when submitting the 2023 Draft State Budget (APBN) and Financial Notes during the plenary session of the House of Representatives (DPR) in Jakarta on Tuesday (16/8/2022).

“Geopolitical conflicts and the war in Ukraine have led to an escalation of supply-side disruptions that have triggered a sharp increase in global commodity prices. This condition has also pushed up the inflation rate in many countries, including Indonesia," said the President.

President Jokowi said that with these various challenges, the International Monetary Fund (IMF) had predicted global economic growth would slow significantly from 6.1 percent in 2021 to 3.2 percent in 2022 and 2.9 percent in 2023.

“The global uncertainty should not make us pessimistic. In the last eight years, we have established important capital to create a more conducive development ecosystem,” said the President.

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According to President Jokowi, massive infrastructure development, improving human resource quality, and simplifying business and investment regulations were key efforts to strengthen the nation’s economic fundamentals in facing future challenges.

“We continue to push for structural transformation to build a more solid and sustainable engine of economic growth. Establishing downstream industries in order to increase economic value added must be strengthened. The green economy will be further encouraged," he said.

The President also asked all agencies to prioritize the use of domestic products in order to reduce dependency on imports. The digital economy should also be strengthened further so it could help micro, small and medium enterprises (MSMEs) to grow. Fiscal consolidation was needed to improve the state budget to be more adaptive and responsive in coping with challenges in both the medium and long terms.

KOMPAS/RADITYA HELABUMI

Mask decorations decorate the entrance of Solo Paragon Mall, Surakarta City, Central Java, Thursday (11/8/2022). The Indonesian Shopping Center Management Association (APPBI) held the 2022 Indonesia Shopping Festival (ISF) which was attended by 388 APPBI member malls throughout Indonesia. In addition to offering shopping discounts of up to 77 percent, ISF also presented local products and MSMEs.

Responding to the President's speech on the 2023 Draft State Budget and Financial Notes, the Institute for Development of Economics and Finance (Indef) held an online discussion in Jakarta on Tuesday afternoon (16/8). On that occasion, Indef researcher Ahmad Heri Firdaus said the downstream industry in the agriculture sector should be further strengthened with large investments. The development of the downstream industry must be right on target, so it could provide added value and create more jobs.

Investment was also needed to increase exports of high value-added products and import substitution. Investment growth in the agriculture sector should also be supported by expanding the domestic market.

“Don't let processed products with high added value have no buyers. A market for domestic products must be created. The government can use the Rp 379 trillion funds allocated for goods procurement in the 2023 draft state budget to buy domestic products. This will definitely help the domestic industry be more expansive,” said Heri.

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Meanwhile, Indef researcher Nailul Huda expressed the hope that the government would continue with its efforts to reduce poverty and overcome social inequalities. The poverty rate had declined but the Gini ratio in urban areas had increased. "Amid rising food and energy prices, conglomerates are getting richer while the poor are getting poorer," said Nailul.

In 2023, the government is targeting a poverty rate in the range of 7.5-8.5 percent, with a Gini ratio of 0.375-0.378. Meanwhile, open unemployment is expected to decline to between 5.3 and 6 percent.

According to Statistics Indonesia (BPS), Indonesia’s poverty rate as of March 2022was 9.54 percent, with a Gini ratio of 0.384. Open unemployment as of February 2022 reached 5.83 percent.

This article was translated by Hendarsyah Tarmizi.