Growth Signals Detected in Indonesia’s Investment Report for Q2 2022
The World Bank's Indonesia Economic Prospects report for June 2022 predicts that Indonesia's economy would grow 5.1 percent in 2022 and 5.3 percent in 2023, as the pressures of deteriorating global economic conditions, increasing inflation, and tightened external credit begin to weigh.
Table of contents
Economic growth prediction of Indonesia
The World Bank’s Indonesia Economic Prospects report for June 2022 predicts that Indonesia’s economy would grow 5.1 percent in 2022 and 5.3 percent in 2023, as the pressures of deteriorating global economic conditions, increasing inflation, and tightened external credit begin to weigh.
The Investment Coordinating Board of Indonesia has released the second quarter investment realization report. Foreign direct investment has climbed by 35.5 percent year on year to IDR 163.2 trillion, with the lion’s share coming from Singapore (27.7 percent), China (20 percent), and Hong Kong (11.9 percent). The top three industries attracting foreign investment are metal goods and equipment manufacturing (27.9 percent), mining (11.1 percent), and housing-industrial estate (8.8 percent). Central Sulawesi, West Java, and North Maluku are the top three places in Indonesia where foreign investors are putting their money this quarter.
According to the report, Financial Deepening for Stronger Growth and Sustainable Recovery, Indonesia’s growth momentum in 2021 carried over into early 2022, with the economy growing at a 5% annual rate in the first quarter. Since the end of last year, the rebound in domestic demand has aided the private sector, notably medium-sized, small, and micro businesses, who suffered disproportionately during the pandemic. Domestic recovery also permitted some budgetary consolidation, although monetary policy remained sufficiently accommodating. As a result, bank lending in support of the recovery has increased.
How the Russian invasion of Ukraine affected Indonesia
The Russian invasion of Ukraine, on the other hand, has exacerbated pandemic concerns. Commodity prices have risen and are expected to remain high in 2022-2023. While Indonesia profited from a boost in commodities revenues in the short term, prices have begun to rise, and foreign finance has tightened. This has worsened policy challenges associated with growing energy subsidies, as well as created headwinds for monetary policy.
While energy subsidies can assist keep prices under control in the medium term, the case for subsidy reform remains strong. It is vital to have a plan in place to shift from providing blanket benefits to providing more personalized help to the poor and vulnerable. A stable and well-functioning financial system is also essential for recovering from the COVID-19 crisis and ensuring long-term economic growth, particularly through investments in services such as health care and education.
Although Russo-Ukrainian has inflationary pressure across the world, it is also evident that the war has no significant impact on Indonesia’s economic growth. You can still expand your business in Indonesia without any hassle. To bring this opportunity home, contact Emerhub EOR service and remotely hire Indonesian talent without any hassle.
To learn more, please contact Emerhub.
Let's grow your business in Indonesia
Get in touch with Emerhub by filling in the form below and our consultants will reach out to you within a few working hours.
More articles from Indonesia
Understanding the process and requirements of Indonesia Halal certification
The rapidly growing Halal market in Indonesia presents an opportunity for businesses in the food, cosmetics, and health industries. This article provides a guide on obtaining certification for both large-scale and MSME businesses.
Tax holiday in Indonesia: An overview of tax exemptions for foreign investors
Discover the Indonesian tax holiday system and learn how it can benefit foreign investors and businesses looking to invest in Indonesia.
What is a Merchant of Record in Indonesia?
Learn how to easily start selling your products in Indonesia using a merchant of record
Payroll calculation in Indonesia: How to do it the right way
The important elements of payroll management in Indonesia and how companies can manage payroll and recruitment in Indonesia effectively.
Should you get the new Indonesian Second Home Visa?
Brand-new Indonesian Second Home program is a new way to live in Indonesia. Learn if meets your needs.
Digitization is accelerating the growth of MSMEs in Indonesia
Indonesia is making rapid progress towards digitization as the country’s e-commerce sector depends heavily on the mobile-first approach. By the end of the year, the country will have 83 percent internet users with an average yearly spend of USD 620. This creates a massive opportunity for investors to invest in Indonesia because of this unique customer behaviour.