IMF Executive Board Concludes 2022 Article IV Consultation with Indonesia
IMF News, March 22, 2022
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- Published: March 22, 2022
Economic outlook and growth projections
- IMF staff project GDP growth at 5.4 percent for 2022 and 6.0 percent in 2023.
- Recovery drivers identified: favorable global commodity prices, easing restrictions on activity, continued policy support, rising mobility and confidence as the vaccination program expands into more remote areas.
- Delta variant surge slowed the recovery in mid‑2021; growth picked up in the fourth quarter of 2021.
- Inflation: expected to rise gradually within the inflation target range in 2022; consumer prices (end period) reported as 3.2 (2018), 2.6 (2019), 1.7 (2020), 1.9 (2021), 3.5 (2022).
- Outlook: improving but with the balance of risks tilted to the downside.
Executive Board assessment and policy stance
- Directors commended authorities for maintaining macroeconomic and financial stability during COVID‑19, aided by substantial policy buffers from years of strong macroeconomic performance.
- Consensus: gradual phase-out of exceptional policy support as recovery takes hold; continued push on structural reforms.
- Fiscal policy:
- Gradual withdrawal of fiscal support deemed appropriate.
- Restoring the pre-pandemic 3 percent of GDP budget deficit ceiling in 2023 recommended to bolster credibility and sustainability of the fiscal framework.
- Support for developing a medium-term revenue strategy to finance high priority spending.
- Savings from energy subsidy reforms could be used to strengthen the social safety net.
- Monetary policy and markets:
- Monetary policy has remained appropriately accommodative to support recovery.
- Directors urged authorities to stay ahead of the curve and closely monitor inflation and inflation expectations to keep them well anchored.
- Encouraged ending central bank primary market purchases and allowing the policy rate to provide a clearer signal of monetary stance.
- Highlighted the role of exchange rate flexibility in absorbing shocks.
- Financial sector:
- Indonesian financial sector remains stable; intensive supervision necessary while crisis-related regulatory relief is in place.
- Welcomed efforts to promote financial deepening and inclusion, including digitalization and credit information sharing.
- Structural reforms:
- Commended ambitious reform agenda; encouraged maintaining momentum on labor and financial market reforms to increase investment, boost growth, and mitigate scarring from the pandemic.
- Recommended improvements to education, women’s labor force participation, and governance frameworks to support medium-term growth.
- Climate change: welcomed mitigation measures and encouraged further reforms including energy subsidy reform, carbon pricing and emission trading system measures, and fostering a green financial market.
Key statistics and selected indicators (as reported)
- Real GDP (percent change):
- 2018: 5.2
- 2019: 5.0
- 2020: -2.1
- 2021 Est.: 3.7
- 2022 Proj.: 5.4
- 2023 Proj.: 6.0
- Domestic demand:
- 2018: 6.3
- 2019: 4.0
- 2020: -3.8
- 2021 Est.: 2.9
- 2022 Proj.: 4.7
- 2023 Proj.: 6.1
- Private consumption (Includes NPISH consumption):
- 2018: 5.1
- 2019: -2.7
- 2020: 2.0
- 2021 Est.: 4.9
- 2022 Proj.: 5.9
- Gross fixed investment:
- 2018: 7.9
- 2019: 4.5
- 2020: -5.0
- 2021 Est.: 3.8
- 2022 Proj.: 7.1
- Gross investment (in percent of GDP):
- 2018: 34.6
- 2019: 33.8
- 2020: 32.4
- 2021 Est.: 31.5
- 2022 Proj.: 31.0
- 2023 Proj.: 31.3
- Gross national saving (in percent of GDP):
- 2018: 31.6
- 2019: 31.1
- 2020: 31.9
- 2021 Est.: 29.8
- Consumer prices (period average):
- 2018: 2.8
- 2019: 1.6
- Public finances (in percent of GDP):
- General government revenue: 2018: 14.9; 2019: 14.2; 2020: 12.5; 2021 Est.: 13.6; 2022 Proj.: 13.2
- General government expenditure: 2018: 16.6; 2019: 16.4; 2020: 18.6; 2021 Est.: 18.2; 2022 Proj.: 17.1; 2023 Proj.: 16.2
- Of which: Energy subsidies: 0.7 (2018), 0.8 (2019)
- General government balance: 2018: -1.8; 2019: -2.2; 2020: -6.1; 2021 Est.: -4.6; 2022 Proj.: -4.0; 2023 Proj.: -3.0
- Primary balance: -0.5 (2018), -4.1 (2019), -2.6 (2020), -1.3 (2021)
- General government debt: 2018: 30.4; 2019: 30.6; 2020: 39.8; 2021 Est.: 42.8; 2022 Proj.: 42.9
- Monetary aggregates and credit (12-month percent change; end of period):
- Rupiah M2: 2018: 6.5; 2019: 13.9; 2020: 8.4; 2021 Est.: 9.0
- Base money: 2018: 0.2; 2019: 19.3; 2020: 8.8; 2021 Est.: 8.8
- Claims on private sector: 2018: 10.3; 2019: 5.8; 2020: -0.4; 2021 Est.: 9.2; 2022 Proj.: 9.7
- Balance of payments (in billions of U.S. dollars, unless otherwise indicated):
- Current account balance: 2018: -30.6; 2019: -30.3; 2020: -4.5; 2021 Est.: -0.8; 2022 Proj.: -20.6
- Trade balance: 2018: 28.2; 2019: 43.9; 2020: 43.3; 2021 Est.: 25.9; 2022 Proj.: 0.3
- Of which: Oil and gas (net): 2018: -11.4; 2019: -10.3; 2020: -5.4; 2021 Est.: -9.7; 2022 Proj.: -6.7; 2023 Proj.: -11.5
- Inward direct investment: 2018: 20.6; 2019: 23.9; 2020: 18.5; 2021 Est.: 20.2; 2022 Proj.: 22.1; 2023 Proj.: 24.5
- Terms of trade, percent change (excluding oil): 2018: -2.3; 2019: -5.6; 2020: 8.9; 2021 Est.: -2.8
- Gross reserves (in billions of U.S. dollars, end period): 2018: 120.7; 2019: 129.2; 2020: 135.9; 2021 Est.: 144.9; 2022 Proj.: 159.1; 2023 Proj.: 169.9
- Gross reserves (in months of prospective imports of goods and services): 2018: 7.4; 2019: 7.3
- As a percent of short-term debt: 2018: 201; 2019: 204; 2020: 209; 2021 Est.: 213; 2022 Proj.: 224; 2023 Proj.: 226
- Total external debt (in billions of U.S. dollars): 2018: 375.4; 2019: 403.6; 2020: 417.0; 2021 Est.: 436.8; 2022 Proj.: 454.4; 2023 Proj.: 488.1
- Total external debt (in percent of GDP): 2018: 36.0; 2019: 39.3; 2020: 36.8; 2021 Est.: 35.4; 2022 Proj.: 34.8
- Exchange rate:
- Rupiah per U.S. dollar (period average): 2018: 14,235; 2019: 14,152; 2020: 14,529; 2021 Est.: 14,297
- Rupiah per U.S. dollar (end of period): 2018: 14,390; 2019: 13,866; 2020: 14,050; 2021 Est.: 14,253
- Memorandum items:
- Jakarta Stock Exchange (12-month percentage change, composite index): 2018: -2.5; 2019: -5.1; 2020: 10.1
- Oil production (thousands of barrels per day): 2018: 810; 2019: 805; 2020: 806; 2021 Est.: 803; 2022 Proj.: 800; 2023 Proj.: 797
- Nominal GDP (in trillions of rupiah): 2018: 14,839; 2019: 15,833; 2020: 15,438; 2021 Est.: 16,971; 2022 Proj.: 18,471; 2023 Proj.: 20,220
Policy recommendations and priorities
- Gradually phase out exceptional pandemic-era policy support while restoring fiscal rules (3 percent of GDP deficit ceiling in 2023).
- Develop and implement a medium-term revenue strategy to finance high priority spending.
- Reallocate savings from energy subsidy reforms to strengthen the social safety net.
- End central bank primary market purchases and let the policy rate signal monetary stance; maintain accommodative stance while guarding inflation expectations.
- Maintain intensive supervision of the financial sector until crisis-related regulatory relief is removed; promote financial deepening and inclusion via digitalization and credit information sharing.
- Advance labor and financial market reforms, education improvements, higher women’s labor force participation, governance reforms, and further climate-related policies including energy subsidy reform, carbon pricing, emission trading system measures, and fostering a green financial market.
Source: Press Release No. 22/84, March 22, 2022, IMF Communications Department.