JakartaPost-June 26, 2023
The World Bank expects Indonesia’s economy to slow down this year as foreign direct investment (FDI) plays a smaller role in the country’s gross domestic product (GDP) than it did before the pandemic. “The FDI in the dollar and the rupiah has been stable. It’s not picked up or declined. But as a share of the economy, it has declined compared with before the pandemic. This is also reflective of the fact that the economy as the denominator has grown,” World Bank senior economist Wael Mansour said in a press briefing on Friday. In its latest Indonesia Economic Prospects (IEP) report, the World Bank notes that FDI has been a steady source of external financing over the past three years amid more volatile and shorter-term portfolio and debt flows. However, the investment opportunity in mature sectors, such as basic infrastructure and real estate, may have “been done,” according to Mansour. “We need to attract [foreign investment] for more complex sectors. It can be [downstream industries], new capital, health and telco. There are a lot of options,” Mansour said. Habib Rab, lead economist at the World Bank, said FDI was low historically because of several market restrictions. However, those concerns had been alleviated with the government’s implementation of the omnibus law on job creation, which the international finance institution called “flagship reforms.” “Whether the positive impact on FDI is sustained or not will depend on three factors: The existence of a large domestic market, the opportunity to process natural resources and manufacturing efficiency,” Rab said at the same press briefing. Different league According to Mansour, Indonesia has emerged successfully from the pandemic as reflected in strong macroeconomic indicators, such as inflation coming down sooner than expected and a reduction in the debt burden both in the public and private sectors. “However, there are still indications of decline in productivity, deceleration in investment and [a] competitiveness metric that is still below [that of] peers,” Mansour said. While the country posted 5.3 percent GDP growth last year, the World Bank projects it to moderate to 4.9 percent this year, and remain broadly flat in the medium term. Read more at:
https://www.thejakartapost.com/business/2023/06/26/world-bank-sees-stagnant-fdi-slowdown-in-growth-for-indonesia.html.
