Economic Recovery of Indonesia to Continue in 2022 as Manufacturing Expands

March 2022

Economic recovery in Indonesia is expected to continue in 2022 because of the growth in investment and the continued strength of exports, according to UOB. UOB forecasts that the country’s 2022 baseline economic growth stays at 5%, within a range of 4.7-5.3% for the purpose of reflecting the current uncertainty regarding the economy reopening, and to include the risk of slower economic growth as a result of Omicron. It is expected that the increase in investments will be supported by rising foreign direct investment (FDI), and also the government’s efforts to facilitate business licensing. The country’s total investments stood at IDR 901 trillion (USD 84.1 billion) in 2021, a 9% increase from 2020.

In addition, the expansion of the manufacturing sector is expected to continue in  2022, as several manufacturing sector indicators such as GDP, investment realization, export achievements, labor absorption and the Manufacturing Purchasing Manager’s Index (PMI) improve. The contribution of the industrial sector in Indonesia reached 19.8% n 2020, which exceeded the world average of 16.5%. Investment in the manufacturing sector in 2021 showed an increase of 19% from 2020, which is beyond government projections.

Indonesian economic recovery will also be supported by the acceleration of National Economic Recovery fund disbursements. Strong export growth is expected to continue due to higher demand from trading partners and firmer commodity prices.

(Sources: The Business Times; IDN Financials)

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