Penulis :

Alvin Desfiandi, Alfian Banjaransari,Carmelo Ferlito,Yohanes Berenika Kadarusman, Rama Poerba

Forecasting the Outlook for the Indonesian economy

The Indonesian outlook is strongly dependent on the evolution of the international economy. The long-term growth potential of the Indonesian economy decreased to 5% since the year 2014, and it is confirmed to that level after the COVID-19 crisis.

The main reasons for the slower growth in investment, compared to the consensus, are the following: 1. A general slowdown of the economy, with a non-negligible probability to run in to a technical recession, (35% of probability of the downside scenario); 2. Contraction in revenues and profits due to the slower growth, together with a constant margin over costs (considering both the cost of the raw materials and the stability of the unit labour cost, ULC. The ULC is the result of an increase in wages of 2.7% just in line with that one of the productivities; 3. An average margin of non-utilized capacity in the industrial sector, non-urging for an acceleration of investment.