Indonesia upbeat on 5% growth despite gloomy China outlook

JAKARTA: Indonesian Finance Minister Sri Mulyani Indrawati says she is optimistic about the 5% economic growth target set for this year despite the darkening global outlook, especially from China.

“We are optimistic for 2023 because we see the figures in the first half,” Indrawati said on Sunday in an interview with Bloomberg Television’s Haslinda Amin ahead of the G-20 finance chiefs’ meetings in India.

South-East Asia’s largest economy flashed another round of warning signs yesterday.

The country’s exports plunged 21% in June due to the sharp drop in global commodity prices.

More worryingly, soft domestic demand pushed imports down 18% last month, lower than all the forecasts in a Bloomberg survey of economists.

“In the second half, there is a positive side from our own side, explicitly on household consumption,” the Finance Minister said.

She added that the general elections next year would also help help spur the economy, thanks to extra spending from the government as well as political parties.

Her comments came as finance chiefs from the world’s largest economies grapple with the risk of a global recession brought about by high interest rates and still-elevated inflation.

Indrawati said Indonesia was looking to strengthen its ties with India as both economies look for ways to shield themselves against the impact of China’s lacklustre performance.

“Their economic growth is remarkably strong.

“And that’s why they need quite a lot of imported commodities from Indonesia,” she said in reference to India.

“We’re here trying to discuss the partnership, which is going to benefit both sides.”

China is grappling with several challenges, including the looming prospect of deflation, subdued economic growth and a faltering property market.

India, on the other hand, is posting one of the fastest growth rates in the world thanks to the expansion of its services sector, cushioning the impact of elevated interest rates.

Resource-rich Indonesia has slashed its 2023 budget deficit estimate to 2.3% of gross domestic product from an initial forecast of 2.8%, as the financial balance remains at an ample surplus through mid-year.

That’s a timely move given that major economies are raising interest rates, which pushes up borrowing costs.

A smaller-than-expected budget gap could also give Indonesia’s government some breathing space before tapping global markets again for bond sales.

“From the financial point of view, we have a quite comfortable level of revenue in US dollars,” Indrawati said.

“That’s helped us in terms of serving our debt for this year and even for the next year.”

Indonesia has been reducing its weekly bond sales as the finance ministry halved its sovereign bond issuance target for this year and will rely on cash reserves to finance the budget.

So far this year, the Indonesian government has sold US$3bil (RM13.6bil) bonds and 104.8 billion yen (RM3.4bil) denominated debt in the Japanese market. — Bloomberg