Resilience as Capital to Face Uncertainty

Global uncertainty can trigger economic recession that can disrupt Indonesia's economic growth targets in 2023. However, Indonesia is considered to have resilience, as reflected in its 2022 performance.

KOMPAS/TOTOK WIJAYANTO

Webinar participants listened to the presentation by the Chancellor of Atma Jaya Catholic University A. Prasetyantoko, Governor of Lemhanas Andi Widjajanto, and Head of the Ministry of Finance's Fiscal Policy Agency who attended online, Fabrio Kacaribu, who were speakers in a webinar held by Kompas.id at Media Nusantara University, Tangerang, Monday (6/372023).

TANGERANG, KOMPAS — The positive record of the 2022 economy is considered a provision for Indonesia’s performance in 2023, which is still full of uncertainty. Indonesia has a number of important capitals that can help it continue to grow positively in the challenging year ahead.

Head of the Fiscal Policy Agency Febrio Kacaribu explained uncertain global conditions that could trigger economic recession still overshadow efforts to achieve the target of Indonesian economic development in 2023.

Uncertainty arises from many sources. On the geopolitical side, the sources of uncertainty are the absence of a bright spot in the resolution of Russian-Ukraine conflicts, climate crises and the impact of technological warfare between the United States and China.

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Meanwhile, the source of economic uncertainty is the aggressiveness of the US central bank, the Federal Reserves (Fed), which is predicted to continue raising its benchmark interest rate. The Fed’s choices can have an impact on Indonesia's efforts to achieve its economic targets.

Despite being faced with a variety of uncertain situations, Indonesia is considered to have the resilience needed to navigate them. This is based on its economic performance from 2022 until the beginning of 2023, which is recorded as quite positive.

"Among the ASEAN countries, we are one of the best. When there is war and food prices skyrocket, Indonesia still grows up to 5.3 percent. We hope in 2023 it will also continue to grow above 5 percent," he said in his keynote speech at a discussion welcoming the 6^th anniversary of kompas.id at the campus of Multimedia Nusantara University (UMN), Tangerang, Banten, on Monday (6/3/2023).

Among the ASEAN countries, we are one of the best. When there is war and food prices skyrocket, Indonesia still grows up to 5.3 percent.

Speakers at the discussion included governor of the National Defense Resilience Institute Andi Widjajanto, economist and rector of Atma Jaya Catholic University Agustinus Prasetyantoko, Ambassador of the Republic of Indonesia to Singapore Suryopratomo and commissioner of the Indonesian Stock Exchange Pandu Sjahrir. UMN rector Ninok Leksono delivered welcoming remarks, while editor-in-chief of Kompas Sutta Dharmasaputra made an opening speech at the event.

Last year's positive growth, Febrio further said, was possible because of improved consumption accompanied by positive export performance. In 2022, the Indonesian trade balance surplus amounted to US$54.4 billion. This surplus was the highest recorded in Indonesian history. On a monthly basis, the trade surplus has lasted 33 months in a row.

KOMPAS/TOTOK WIJAYANTO

Atma Jaya Catholic University Chancellor A. Prasetyantoko (left), Governor of Lemhanas Andi Widjajanto, and Head of the Ministry of Finance's Fiscal Policy Agency who attended online, Fabrio Kacaribu, became speakers in a webinar held by Kompas.id at Media Nusantara University, Tangerang, Monday (6 /372023).

This positive achievement is linked to last year’s soaring commodity prices, such as oil and gas and palm oil. In addition, nickel downstreaming supports our trade balance. In 2022, the value of nickel exports and its derivatives increased to $33 billion from $22.2 billion in 2021.

However, Indonesia cannot constantly rely on the high prices of oil and gas, coal and palm oil as state income, because commodity prices are predicted to fall this year. Investment, consumption and finding a source of non-tax revenue are needed to maintain the rate of economic growth.

The success of Indonesia in navigating 2022 is moreover linked to the role of the State Budget (APBN) as shock absorber. By means of the APBN, the government provides subsidies so the purchasing power of citizens can be maintained in the midst of the volatility of food and energy prices due to war and food crises. "This is also done in designing the 2023 State Budget," he said.

Development opportunities

Pandu Sjahrir said downstreaming was indeed an aspect of Indonesian resilience. For this reason, in 2023 Indonesia needs to accelerate growth and investment in high-value sectors, such as agriculture and minerals. The positive impact of the downstreaming of minerals, especially nickel, is expected to contribute positively to the development of the electric vehicle (EV) industry, the government’s current ambition.

Augustinus Prasetyantoko said the threat of recession was predicted to weaken, as seen in the US inflation rate as of February 2023, which dropped to 6.4 from 7 percent at the end of 2022. Considering this, the Fed is expected to keep the interest rate at around 5.25 percent until the end of the year.

Also read:

> World Recession 2023: How Severe?

> Indonesia Can Survive Recession While Economic Growth Slows

However, there is an overshadowing threat, in that with an open economic system, foreign capital easily enters and exits Indonesia. This capital flow will be greatly influenced by the Fed's benchmark interest rate.

"The recession scenario is indeed weakening, but the threat is not over, because the target of the American government is 2-percent inflation. If the Fed raises interest rates and there is capital outflow, the rupiah will weaken. This is a problem we might experience," he said.

Geopolitical challenges

Andi Widjajanto said the government needed to be aware of several things this year, one of which is the escalation of the Ukraine-Russian war, which, in the worst-case scenario, can involve nuclear weapons. In addition, several elections in a number of countries can also potentially create uncertainty at the global level. This year, there are several elections that will be held, namely in Ukraine, Nigeria, Myanmar and Turkey.

Suryopratomo said there were several global challenges that would be faced by many countries: first, the increasing cost of living, which pinches people's lives, and second, extreme weather and natural disasters. (Z15)

This article was translated by Hyginus Hardoyo.