RECENT DEVELOPMENTS IN INDONESIA

Indonesia is one of the EMDEs countries, where in 2022 it had a GDP growth of 5.3%. This growth is much higher than the global growth of 3.1%. Meanwhile, Indonesia is also predicted to have a GDP growth of 4.9% - 5.0% in 2023-2025. This is also higher than the global GDP growth which is estimated to only reach around 2.1% - 3.0%. Among the 5 countries in selected East Asian companies, the economic growth in Indonesia is not the highest, but relatively stable. During pandemic, the government of Indonesia has never allowed the lockdown. However, they imposed the Community Activities Restriction Enforcement or CARE (Pemberlakuan Pembatasan Kegiatan Masyarakat or PPKM). By doing this, the economy activities could still be done although there were some restrictions. The result was the growth of goods exports in Indonesia were significantly higher than some East Asian countries, although it was also significantly declined during the end quarter of 2022. Inflation remains above central bank targets in some countries, including Indonesia. At that time, Bank Indonesia, which is the central bank of Indonesia has signaled a pause to tighten policy rates. The region’s recovery from the pandemic-induced recession is now well advanced, with output exceeding pre-pandemic levels in many countries, including Indonesia.

recent-developments-in-indonesia

Indonesia


The Indonesian economy is also inseparable from the pressure caused by COVID-19, which originates from turmoil that has never been experienced in the previous periods. Based on the 2020 Indonesian Economic Report compiled by Bank Indonesia, the Government is pursuing an expansionary fiscal policy to overcome the impact of the COVID-19 pandemic.

This expansionary fiscal policy is based on the stipulation of Act Number 2 of 2020, which is the basis for the Government to widen the fiscal deficit above 3% of GDP until 2022. Following up on this matter, the Government issued Presidential Regulation Number 54 of 2020, which was last revised into Presidential Regulation Number 72 of 2020, as the basis for the 2020 State Budget deficit to be 6.34% of GDP. This deficit resulted due to the state spending that has increased to IDR 2,739.2 trillion, with a special budget allocation for the National Economic Recovery (PEN) program of IDR 695.2 trillion. The PEN program includes Public Goods spending of Rp. 397.56 trillion for health, social protection, ministries and institutions, and regional governments, and non-Public goods spending of Rp. 297.64 trillion for business incentives, MSME support, and corporate financing.

The government has set a number of stimuli in the form of fiscal incentives, including:

a.Income Tax Article 22 (PPh pasal 22) Exemption 

b. Additional Incentives for Bonded Zone & KITE Companies