Jakarta, CNBC Indonesia – Indonesia’s economic growth in the political year tends to stagnate at around 5.1%. This projection is slightly lower than the government’s target in the 2024 APBN Law, amounting to 5.2%.
The Economic and Community Research Institute (LPEM) FEB UI revealed that this projection is quite stable compared to our revised estimate for 2023, namely 5.0% – 5.1%.
“The political climate and global monetary conditions will be the two main themes that will influence Indonesia’s economic conditions in 2024,” said LPEM in the Indonesia Economic Outlook 2024, quoted on Wednesday (22/11/2023).
In 2024, LPEM emphasized that the General Election period will have an impact on growth and various other macroeconomic indicators next year.
On the one hand, Indonesia will hold simultaneous elections for the first time from the national to district/city level; thereby encouraging the injection of large amounts of liquidity into the economy due to campaign spending and public spending.
“The large multiplier impact on the economy will trigger domestic consumption during 2024 considering that elections at the provincial and district/city levels are expected to occur towards the end of the year,” wrote this report compiled by Jahen F. Rezki, Teuku Riefky and others.
However, on the other hand, LPEM assesses that the long transition period of power until the new government takes office will prolong the period of ‘wait-and-see’ sentiment by the private sector and have the potential to hamper the rate of economic growth and investment.
Therefore, in the future, LPEM considers it very important to maintain the stability of consumer confidence, price levels and exchange rates to maintain short-term economic growth amidst various potential uncertainties.
Wait and See Effect
Furthermore, LPEM warned that the transition period of power until the new government takes office will prolong the period of ‘wait-and-see’ sentiment by the private sector and have the potential to hamper the rate of economic growth and investment.
Bank Mandiri Chief Economist Andry Asmoro said referring to data from previous elections, investment growth tends to slow down in political years.
He said investors chose to postpone investing until the election was over.
“There is indeed a wait and see factor there,” said Andry, quoted on Wednesday (22/11/2023).
Andry said that to break the cycle of sluggish investment in this political year, the government must continue the investment attraction program that is already running. For example, for the nickel downstream program, he said the program could still continue in the midst of political events every 5 years. “Nickel has been implemented, downstreaming to other industries can also be done,” he said.
Andry believes that when the government can focus on implementing programs to attract investment, the flow of capital into the country will remain smooth. He said the government can reassure investors that the change in power does not mean the old program will end.
“From the time of SBY (Susilo Bambang Yudhoyono) to Pak Jokowi there is also a common thread in terms of infrastructure development,” he said.
[Gambas:Video CNBC]
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