Thursday, 29 October 2020 | 13:55 WIB

ADB: Consumption to Support Indonesian Economic Growth in 2019-2020

ADB: Consumption to Support Indonesian Economic Growth in 2019-2020 (market)

JAKARTA, NETRALNEWS.COM - Asian Development Bank (ADB) saays strong domestic consumption will maintain the pace of growth of the Indonesian economy in 2019 and 2020.

"Strong consumption will make Indonesia able to continue its economic growth this year and next year," said ADB's Chief Representative for Indonesia Winfried Wicklein.

He said consumer spending is expected to maintain strong growth that is supported by rising household incomes, employment, and low inflation.

Wicklein estimates inflation to remain stable at 3.2 percent in 2019, and reach 3.3 percent by 2020, so that it can help maintain the momentum of private spending. "Core inflation will probably be maintained and food prices will not change," he said.

He continued that despite the weakening of growth among trade partners so as to successfully influence Indonesia's trade balance, the current account deficit is estimated to be kept at 2.7 percent of Gross Domestic Product (GDP) in 2019.

"However, investment and economic growth that is starting to accelerate may cause a deficit in the current account that may widen to 2.9 percent of GDP by 2020," Wicklein said.

On the other hand, investments have the possibility to continue to strengthen until towards the end of 2019 due to the progress of the development of national strategic projects to improve the infrastructure network.

In addition, Bank Indonesia's recent interest rate cut to 5.25 percent also has the opportunity to provide an injection of energy for credit growth so that private investments will continue to improve.

"This is in line with the expectations of various new reform policies to improve the business climate and accelerate economic modernization," Wicklein said.

Nevertheless, he said that overall the fundamentals of the Indonesian economy are still solid, as evidenced by a well-managed fiscal position, stable prices, and foreign exchange reserves in a fairly safe position.

"Nevertheless, stronger investments are still needed to drive growth, with a focus on competitiveness and human resource development," he added.

Wicklein also projects that Indonesia's economic growth in 2019 will still be 5.1 percent, which is down compared to 5.2 percent in 2018. But with the support of strong domestic consumption, Wicklein estimates that economic growth in 2020 will rise again to 5.2 percent.