"The optimism is backed up by economic recovery, and until the second quarter, it grew impressively at 5.44 percent; with this growth rate (making us) among the highest in the G20 and ASEAN," Minister Indrawati noted during the House of Representatives' Plenary Meeting here on Tuesday.
Indonesia's economic growth in the second quarter of 2022 was better than other developed and developing countries, as they turned out to see some decline in growth due to inflationary pressures and stricter monetary policy.
Indonesia's inflation was also considered to be still at a moderate level of 4.94 percent year on year in July 2022.
"The performance of growth and inflation until the first semester of 2022 provides a basis for optimism. However, we still exercise extreme caution due to thick and dark clouds in the form of inflation, interest rate hikes, stricter liquidity, and the decline in economy, as well as geopolitical tensions," she elaborated.
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Indrawati noted that all factors that caused the economic turmoil also began to plague Europe, the United States, and China's economic situation.
"This condition causes a negative (ripple effect) throughout the world in the form of a food and energy crisis as a result of supply chain disruption and very sharp increases in the world food and energy prices," she added.
According to the minister, the increase in interest rates would also wreak havoc in the money market and capital outflows from developing countries that had the risk to further weaken the exchange rate and force interest rates to be adjusted up.
“The impact of this global propagation can threaten the Indonesian economy (with aspects such as) inflationary price pressures, weakening demand, and (lesser) economic growth. The 2023 state budget will again be (burdened) with challenges and tough tasks, that being a protector or shock absorber for the community, economy, and state," Indrawati remarked.
Although the state budget continued to be used to protect the public economy, fiscal consolidation at the same time was also conducted to maintain the state budget health in a disciplined and consistent manner.
"This is a strategy to maintain sustainable development and economic progress on one hand, and on the other hand, to maintain sustainability of the state budget itself," she concluded.
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Translator: Sanya D S, Mecca Yumna
Editor: Suharto
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