October 13, 2023
JAKARTA – The International Monetary Fund (IMF) has maintained Indonesia’s growth forecast at 5 percent for this year while lowering its projections for other emerging economies in Asia, with India being the only other exception.
Indonesia’s economy is expected to keep to its projected growth path of 5 percent in 2023, according to the IMF’s latest World Economic Outlook published on Tuesday.
This figure remains unchanged from the fund’s April report and puts Indonesia on a par with the IMF’s latest growth projection of 5 percent for China.
In China’s case, however, the latest projection is 0.2 percentage points lower than the fund’s April forecast, reflecting expectations of a stronger headwind from its real estate crisis and weakening confidence among businesses and consumers.
The growth projections for Indonesia’s ASEAN neighbors, namely Malaysia, the Philippines, Thailand and Vietnam, have been lowered by between 0.5 and 0.9 percentage points compared to the IMF’s April outlook.
In contrast, the IMF revised its projection for India upward by 0.4 percentage points from its April figure to 6.3 percent, reflecting stronger-than-expected consumption through June.
Overall, the IMF expects growth in Asia’s emerging markets and developing economies to slow by 0.1 percentage points to 5.1 percent compared to its April outlook. This is also in line with the fund’s slower global forecast of 3 percent growth, down from 3.6 percent in its previous report.
Pierre-Olivier Gourinchas, economic counselor and research director at the IMF, said on Tuesday that global growth prospects were weak, especially for emerging markets and developing economies.
“The implications are profound: a much slower convergence toward the living standards of advanced economies, reduced fiscal space, increased debt vulnerabilities and exposure to shocks, and diminished opportunities to overcome the scarring from the pandemic and the war,” Gourinchas wrote on IMFBlog.
The fund has projected global headline inflation to continue to slow from 9.2 percent year-on-year (yoy) in 2022 to 5.9 percent this year, and then to 4.8 percent in 2024.
It has also projected a decline in core inflation, excluding food and energy prices, albeit at a more gradual rate to 4.5 percent next year.
Inflation in China, Thailand and Vietnam is expected to average below their targets this year.
The projection for China reflects subdued core inflation in the context of substantial economic slack, with rising youth unemployment and pass-through from lower energy costs, according to the IMF’s October report.
The fund projects slower inflation in Thailand due to the impact of lower energy prices on core inflation, as well as lower house prices. In Vietnam, the inflation slowdown is attributed to an overall decline in economic activity and pass-through from lower energy prices.