Seven Steps to Navigating Recovery in 2023
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Kompas100 CEO Forum participants powered by East Ventures walk together after taking a photo with President Joko Widodo on the steps of the Merdeka Palace, Jakarta, Friday (2/12/2022).
Many see 2023 as a year of gloom. After nearly three years of closure due to the Covid-19 pandemic, a global recession now threatens as a result of the prolonged Russia-Ukraine war.
However, as the saying goes, it is better to light a candle than to curse the darkness.
A number of international institutions have predicted a global economic slowdown in 2023. Those who are pessimistic think of it as a dark year. On the other hand, those who are optimistic interpret it as a year of challenges.
Indonesia is among the countries that have been able to deal with the global health crisis that has lasted for almost three years. World Health Organization Director General Tedros Adhanom Ghebreyesus praised Indonesia’s measures to mitigate the Covid-19 pandemic.
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When under the pressures of the pandemic, its economic performance fell in the second quarter of 2020. However, it has continued to rise since. This year’s performance shows a positive trend in the areas of fiscal, monetary, financial services and financial system stability, structural reforms, and developing the business climate. Growth in the third quarter of 2022 even grew 5.72 percent, higher than growth in Q2 2022, which was 5.45 percent year-on-year (yoy).
IMF managing director Kristalina Georgieva once said: "Indonesia is a bright spot in the midst of the global economic downturn."
Evidence that Indonesia has actually been a bright spot in the midst of global gloom was also seen through Indonesia's Group of 20 presidency. The Economist magazine’s 19 Nov. 2022 edited had Indonesia on its cover under the title: ”Asia's Overlooked Giant. Can Indonesia live up to its promise?” The overlooked giant of Asia. Can Indonesia fulfill its potentials? The photo showed a smiling President Joko Widodo climbing stairs above the clouds of a bright and blue sky.
Challenging
Nonetheless, towards 2023, economic slowdown is starting to be seen at the global and national levels. Vigilance is necessary. According to the Economic Outlook November 2022 November 2022 publised by the Organisation for Economic Co-operation and Development (OECD), world economic growth in the fourth quarter of this year is projected to grow only 2 percent yoy.
Economic growth in 2023 is projected to slow to 2.2 percent.
On an annual basis, the world gross domestic product (GDP) is also projected to grow only 3.1 percent in 2022. This figure is down around 50 percent from the previous year’s growth of 5.9 percent. Economic growth in 2023 is projected to slow to 2.2 percent.
There are also signs of an economic slowdown in Indonesia. Inflation has increased, although not as high as in other countries. Consumer spending declined and began to cut into the number of workers. The trade surplus also started to come under pressure in September to reach US$4.9 billion, down from $5.76 billion in the previous month. However, it again increased to $5.67 billion in October.
Kompas Gramedia CEO Lilik Oetama accompanied by East Ventures Managing Partner Willson Cuaca handed over the Kompas100 CEO Forum whitepaper to President Joko Widodo at the Kompas100 CEO Forum event powered by East Ventures at the State Palace, Jakarta, Friday (2/12/2022).
The Consumer Confidence Index (IKK) also fell to 117.7 in September, a decrease from 124.7 in August. However, the IKK again rose in October to 120.3.
Another challenge is the increasing political temperature in 2023 with the approach of the 2024 presidential election. It is feared that society will become sharply polarized again. In fact, the spirit of gotong royong (mutual cooperation) was a vital asset that enabled the country’s success in dealing with the health crisis.
Another challenge is the increasing political temperature in 2023 with the approach of the 2024 presidential election.
With these challenges, Bank Indonesia has still projected that Indonesia's 2023 growth will remain strong in a range of 4.5-5.3 percent. This growth will even continue to increase to 4.7-5.5 percent in 2024.
Now, it remains for us to formulate a strategy to face a year full of challenges. It is necessary to formulate the right strategy and policy recommendations to mitigate the risk of recession, navigate the economy, and accelerate transformation, which is the central theme of the 2023 economic policy, while maintaining political stability and security.
Seven steps
Kompas recommends seven steps to generate light for an otherwise “dark” 2023. First, increase mitigation against the risk of Covid-19 transmission and strengthen the health system as a basis for easing reliable socioeconomic activities.
Second, maintain sociopolitical stability and national security and increase the effectiveness of both central and regional governments in the political year, and in the eventuality that international conflicts continue to escalate. Manage the dynamics of the political year, namely by emphasizing the right policies in the midst of superpower rivalry, and guarantee and increase the effectiveness of the work of both the central and regional governments.
Third, maintain financial system stability amidst the global recession and financial turmoil. Fourth, maintain and develop the demand side: domestically, by maintaining people's buying power (low inflation, increasing people's income, maintaining the availability and stability of food prices); internationally, by developing new export markets, ratifying international agreements, and spurring trade agreements in new markets.
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Fifth, ensure three main inputs on the supply side, namely by providing certainty in the labor sector, such as the wage mechanism. Ensure the availability of raw materials along with the smooth distribution of goods for the short term, both domestically as well as in exports and imports, by offering incentives, simplifying permits, and cutting logistics costs, as well as the availability of energy supplies and stability of energy prices.
Sixth, ensure that fiscal policy serves as an anchor of economic stability as well as an accurate and effective driver of both the demand and supply sides. Seventh, encourage exciting innovations while increasing the efficiency of various community, business and government activities in the new normal.
President Joko “Jokowi” Widodo's orchestration as the head of state and of all stakeholders, as well as the spirit of gotong royong among all elements of society will bring hope in 2023.
Sutta Dharmasaputra
Sutta Dharmasaputra, Editor-in-chief
This article was translated by Hyginus Hardoyo.