It cited growing uncertainty because of the rapid spread of the Omicron variant (which might put renewed pressures on Indonesia’s health system, particularly the hospital sector, hence may require the central government to impose tighter social and business restrictions), and looming global monetary tightening (particularly stemming from the United States) that may have spill-over effects on other markets. Meanwhile, the IMF decided to cut its projection for Indonesia’s economic growth in 2023 from 6.4 percent (y/y) previously, to 6.0 percent (y/y).

Nonetheless, the IMF’s growth projection of 5.6 percent (y/y) in 2022 – if achieved – would be well above growth rates we saw in pre-COVID-19-pandemic times. The last time Indonesia experienced growth near that level was in 2013.

And, if we compare the IMF’s latest projection (despite the downward revision) with projections expressed by other institutions, then we can certainly conclude that the IMF remains the most optimistic institution in terms of Indonesia’s 2022 economic growth projections (see the table on the next page).

Cheng Hoon Lim, IMF’s Assistant Director for the Western Hemisphere Department, stated that the recovery of the Indonesian economy in 2022 will be encouraged by the COVID-19 vaccination program that is currently reaching the more isolated parts of Indonesia. With the subsequently increasing national vaccination coverage rate, Indonesians will regain the confidence to go out and consume, while the Indonesian government will not need to impose new social and business restrictions.

On the upside, Lim said she expects the boost from global commodity prices to last longer than earlier expected, while recent and prospective structural reforms could reduce the extent of economic scarring in Indonesia. Furthermore, the IMF advises Indonesia to wind down government spending in the context of the COVID-19 crisis (the national economic recovery budget; in Indonesia known as Pemulihan Ekonomi Nasional, or PEN) in a gradual and coordinated manner to avoid the emergence of possible shocks that could destabilize the country’s economic recovery.

So, while on the one hand, the IMF stated that it applauds the Indonesian cabinet for its commitment to bring the government’s budget deficit cap back to three percent of gross domestic product (GDP) by 2023 (a ceiling that was temporarily lifted for the years 2020, 2021, and 2022 via Law No. 2 of 2020 in order to have additional financial resources at hand to combat the COVID-19 crisis) by consolidating public finances via the phasing out of emergency COVID-19 support, it – on the other hand – warns that a too quick phasing out of the emergency packages could jeopardize the country’s recovery in case new COVID-19 infection waves arrive or, more generally, in case the recovery from the crisis will require more time than expected.


Read the full article in our January 2022 report. Order the report by sending an email to or a message to +62.882.9875.1125 (including WhatsApp).

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