The economic recovery in various regions remained intact in the fourth quarter of 2022 despite dynamic external and domestic challenges. Despite the global headwinds, the domestic economy remained resilient in the reporting period on the back of solid non-oil and gas export performance and domestic demand. Meanwhile, Covid-19 cases in all regions remained under control, thus stimulating economic activity. Retail sales and consumer confidence were still strong in the fourth quarter of 2022, underpinned by the national religious holiday (HBKN) during Christmas and New Year festive period. On the other hand, investment growth in the fourth quarter of 2022 is projected to moderate from the previous period due to the delayed completion of several government infrastructure projects, notwithstanding early indications of recovery amongst private sector projects. Spatially, strong exports supported tradable sector performance in various regions, including mining in Sulampua and Kalimantan, as well as the manufacturing industry in Java and Sumatra. Overall, in 2022, economic recovery is predicted to endure in nearly all regions, exceeding the previous projections.
In terms of prices, inflation in all regions remained under control at the end of 2022 and below the initial projection, with milder inflationary pressures predicted in 2023. Nationally, Consumer Price Index (CPI) inflation was recorded at 5.51% (yoy) in 2022, up from 1.87% (yoy) in 2021, thereby exceeding the upper bound of the 3.0%±1% target. Inflationary pressures intensified throughout 2022 in all regions, primarily impacted by administered prices and volatile food. This increase is in line with government policy to adjust fuel prices as well as supply disruptions affecting strategic food commodities, given soaring international commodity prices and inclement weather. Notwithstanding, inflationary pressures after the fuel price adjustments remained manageable, as reflected by anchored inflation expectations and inflation realisation in 2022, which was lower than the initial projection. Such affirmative developments were the positive outcome of close policy synergy between Bank Indonesia, the Central and Regional Government and various strategic partners through the Central and Regional Inflation Control Teams (TPIP and TPID), along with the implementation of the National Movement for Food Inflation Control (GNPIP) to lower inflation, which included managing the second-round effect of fuel price adjustments. As a result, CPI inflation in 2023 is projected to track a downward trend and return to the national inflation target corridor in line with lower international commodity prices and neutral weather conditions.
This edition of the Nusantara Report specifically raises the strategic issue of “Accelerating the Strengthening of the Manufacturing Industry Structure for Economic Revival". Efforts to bolster economic resilience amid global economic turmoil must be supported by accelerating the downstreaming of natural resources to strengthen national economic recovery and to achieve sustainable economic growth.
