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November 21, 2024 | 05:19 pm
TEMPO.CO, Jakarta - Institute for Development of Economics and Finance (Indef) projects Indonesia's economic growth to stagnate at 5.0 percent in 2025. This was influenced by various factors, including the geopolitical situations following the U.S. presidential election and Indonesia's adjustment to the new government.
"We project 2025 economic growth to be around 5.0 percent," said Indef's Executive Director, Esther Sri Astuti, during the presentation of "Indef 2025 Economic Projections" in Central Jakarta, which was also broadcasted on Indef's YouTube channel on Thursday, November 21, 2024.
Indef also forecasts Indonesia's inflation next year to be at 2.8 percent year-on-year (yoy), the exchange rate at Rp16,100 per U.S. dollar, the open unemployment rate at around 4.75 percent, and the poverty rate at approximately 8.8 percent.
Several factors influencing this analysis include the ongoing geopolitical states following Trump’s election as U.S. 47th president, as well as the underperforming demand from China.
Meanwhile, domestically, Indef notes the absence of rapid stimulus or incentives to improve the declining purchasing power and the deteriorating industrial conditions. Additionally, 2025 is expected to still be a year of adjustment for Indonesia with the new government.
This research institution also emphasizes the slowdown in consumption and the weakening purchasing power of Indonesians. Previous data from Statistics Indonesia (BPS) indicated that Indonesia experienced deflation for five consecutive months from May to September 2024.
The decline in purchasing power is evident from the consumption growth rate in the first to third quarters of 2024, moving slower than the economic growth rate.
Meanwhile, the sales volume of basic necessities in e-commerce or local markets also experienced a decline. "This condition illustrates how the purchasing power of the people is weakening," she said.
She suggests correcting the benchmark interest rate level to stimulate real sectors, especially the industrial sector. Recently, Bank Indonesia decided to maintain the BI rate at 6.00 percent on November 20, after cutting it by 25 basis points in September.
She also urges for an increase in credit distribution, as bank credits have also declined with the weakening purchasing power. In this regard, the manufacturing sector experienced a significant drop.
According to BPS data processed by Indef, the manufacturing sector's share of total credit decreased from 18.7 percent in 2015 to only 15.3 percent in August 2024.
"The slower growth of manufacturing credit compared to the average national credit growth is an indication that the manufacturing sector is experiencing a performance decline," she stated.
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