Indonesia Economic Outlook 2023
The year 2022 was not easy for Indonesia. There were nearly 2.5 million cases of COVID-19 last year, which brought the total number of COVID-19 cases in Indonesia to 6.72 million through 2022. Last year, Indonesia also experienced a livestock foot-and-mouth disease (FMD) outbreak. In addition, the war in Ukraine has impacted Indonesia’s consumers, affecting the distribution of wheat – as Ukraine is one of the world’s primary producers – and the price of cooking oil in Indonesia.
In 2022, the Indonesian government focused more on investment and import substitution to accelerate national economic recovery. The groundwork for the commodity balancing initiative was laid by issuing Presidential Regulation 32/2022 to simplify trade licenses and give policymakers more centralized data to determine trade policies. This was followed by several policies to tighten trade while widening investment in mining products and natural commodities, as well as efforts to advance energy efficiency and transition through policies on electric vehicle conversion, as well as expanding financial inclusion.
The year also saw Indonesian efforts to influence the international stage. Indonesian President Joko Widodo and five other global leaders were named members of the Champion Group of the Global Crisis Response Group (GCRG). Indonesia also completed its G20 Presidency in 2022. Indonesia received several investment commitments and grants in 2022 that have been attributed to the completion of G20 leadership. Indonesia also sealed a USD 20 billion deal for energy transition through the Just Energy Transition Partnership (JETP) led by developed countries in the International Partners Group (IPG). Those funds will be used to support the clean energy transition by reducing emissions in the electricity sector and developing renewable energy.
Following the success of Indonesia's 2022 G20 Presidency and its active participation in the Asia-Pacific Economic Cooperation (APEC) grouping, Indonesia's 2023 Chairmanship of the Association of Southeast Asia Nations (ASEAN) is seen by many as another testament to Indonesia's independent and active foreign policy. Indonesia's ASEAN Chairmanship will likely implement the same approach regarding unresolved challenges such as the Myanmar post-coup violence and South China Sea disputes.
These accomplishments in 2022 are key milestones leading to the Indonesia Vision 2045. In trade, the government is actively promoting domestic products to accelerate national economic recovery as the nation enters the post-pandemic era. Entering 2023, the current electoral race could impact Indonesian economic and political priorities. There is a tendency for the government and legislators to embrace a more inward-looking economic policy leading up to the 2024 election.
EGA Indonesia's Economic Outlook provides an overview and analysis of critical sectors in Indonesia during 2022 and examines significant policy and trends to watch in 2023.
