The IMF believes that Indonesia's internal economic strength is capable of recording healthy and positive growth.
The Managing Director of the International Monetary Fund (IMF) Kristalina Georgieva said the extraordinary progress in reforms over the past few years had made Indonesia more resilient to shocks.
"When the Covid-19 hit, Indonesia's macro fundamentals managed to prevent a significant decline, there was a decline in economic output but not as deep as in many other countries," said R Kristalina Georgieva while visiting Sarinah with SOE Minister Erick Thohir and the Minister of Tourism and Creative Economy (Menparekraf). ) Sandiaga Uno in Jakarta, Sunday (18/7).
Although the world is facing the impact of geopolitical conditions due to the Russo-Ukrainian war, Indonesia's economic growth is still relatively strong above 5% with a relatively low inflation rate of around 4%.
Georgieva believes that the internal strength of the Indonesian economy is capable of recording healthy and positive growth even though the world is experiencing economic and geopolitical turmoil.
Georgieva said that in the IMF's basic scenario, her party does not expect a global recession, either in 2022 or 2023. But some countries are facing recession, such as Russia and Ukraine.
In 2023, the IMF is more concerned about tightening financial conditions that could further reduce economic growth.
In a slowing world economy, countries like Sri Lanka are currently unable to pay their debts which can lead to capital outflows from emerging markets.
Georgieva revealed that the condition had already occurred, even in the first half of this year as much as US$52 billion had left emerging markets.
Two Policies
He conveyed that there are two important policies to take to protect Indonesia from external impacts due to the pandemic and geopolitics.
First, fiscal policy must continue to focus on targeted aid, not to provide subsidies to everyone, including the rich, but to target aid to those in need.
Georgieva said it was very important to prevent an increase in poverty by targeting social assistance where it was most needed.
According to Georgieva if fiscal policy consumes too much of the budget, it can push inflation up which could be a problem for monetary policy.
Second, during the crisis due to the pandemic, Bank Indonesia (BI) has provided some monetary support in collaboration with the government which will be completed by the end of 2022.
"We strongly recommend that this decision be respected in order to protect the economy from shocks," Georgieva said. (Among)
