Regional economic performance is expected to remain solid, supported by domestic demand and maintained export performance. Such developments are primarily supported by increasing domestic economic activity amid continued global dynamics. Covid-19 cases in all regions are under control due to the accelerated vaccination and booster programs, leading to increased mobility. Domestic consumption improved in the first quarter of 2023 compared with conditions in the previous period, supported by strong consumer confidence and retail sales. Investment in the first quarter of 2023 is also projected to improve from the previous period in line with the completion of several national strategic projects in various regions, which were postponed in 2022, along with the implementation of downstreaming. However, several challenges, including high rainfall as well as land acquisition and licensing constraints, have impacted investment performance in the first quarter of 2023. Meanwhile, global pressures have subsided due to fewer disruptions in the global supply chain and China's economic improvements. Consequently, exports remain the primary driver of regional growth, supported by the potential impact of economic reopening in China on the performance of Indonesia's key exports. Therefore, national economic growth in 2023 is forecast with a bias towards the upper bound of the 4.5-5.3% range.
In terms of prices, Composite CPI inflation for cities in all regions remained under control in the first quarter of 2023. Nationally, Consumer Price Index (CPI) inflation reached 4.97% (yoy) in the first quarter of 2023, down from 5.51% (yoy) in the fourth quarter of 2022, which is still above the national CPI target of 3.0%±1%. Milder inflationary pressures in the reporting period were observed in all regions, primarily influenced by core inflation and administered prices (AP) in line with gradually higher demand, anchored inflation expectations, lower international commodity prices, maintained exchange rates as well as price adjustments to non-subsidised fuel and airfares. Meanwhile, volatile food (VF) inflation increased, particularly the composite CPI index in the regions of Sumatra, Java and Sulampua, driven by a seasonal spike in demand ahead of the Eid-ul-Fitr national religious holidays (HBKN) along with inclement weather that disrupted supply continuity. In 2023, CPI inflation returning to the 3.0%±1% target in the second semester of 2023. Bank Indonesia and the (central and regional) Government, along with other strategic partners in the National and Regional Inflation Control Teams (TPIP and TPID), remain committed to controlling inflation by strengthening the National Movement for Food Inflation Control (GNPIP).
This edition of the Nusantara Report specifically raises the strategic issue of “Strengthening the Digitalisation of Payments in Government Programs towards National Economic Resilience and Efficiency". The recovery process and economic structural improvements must be continued to maintain stability and drive sustainable economic growth. One of the efforts to safeguard resilience and strengthen the economic structure is through accelerating digital transformation, particularly in the economy and finance. Bank Indonesia's efforts to stimulate the digital economy and finance focus on three main pillars, namely the digitalisation of social assistance program (bansos) disbursements (G2P 4.0), regional government transactions (P2DD) as well as the digitalisation of transportation (electronification of payments), to encourage the development of a digital-based payment transaction ecosystem to support the resilience and efficiency of the national economy. Going forward, the opportunity to accelerate the digitalisation of payments is growing in line with stronger institutional arrangements, supported by various digitalisation program initiatives implemented by government ministries and agencies underpinned by regional government commitment to support digitalisation.
