2022 is considered to be a momentum for accelerating economic growth for Indonesia. This is because market conditions are heading towards the normalization phase, and Indonesia is actually considered to be in the acceleration phase in 2022. Chief Economist & Investment Strategist of PT Manulife Aset Manajemen Indonesia (MAMI) Katarina Setiawan said, in the span of 2020 to 2022 there are three important phases, namely the pandemic phase in 2020, then the recovery phase in 2021, and will continue with the normalization phase in the global market, while Indonesia will actually experience an acceleration phase in 2022. He said the pandemic in 2020 will cause a contraction of global GDP growth by 3.5 percent. After experiencing an extreme decline in 2020, global GDP experienced a massive increase and grew by 5.9 percent in 2021.
“We estimate that in the future global economic growth will begin to move in a normal direction. This means that global economic growth in 2022 will be lower than 2021, but still higher than the long-term average," Katarina said virtually, Tuesday (7/12/2021). Katarina said, after showing very high growth in 2021, global trade activity in 2022 is expected to grow above the long-term average, but growth will not be as high as in 2021. Normalization does not only occur in economic growth, but also in monetary and fiscal policies. In terms of monetary policy, in line with the era of global economic normalization, the world's central banks also made adjustments to policy directions. Interest rates are expected to increase gradually while taking into account the conditions related to the pandemic. Central bank communications and signals will be crucial in 2022, especially amid the uncertainty of rising inflation. "So far, the market has been anticipating an increase in US Treasury yields and two Fed rate hikes in 2022," she said. Meanwhile, normalization in terms of fiscal policy will be in the form of a gradual reduction of pandemic stimuli towards normal levels in an era of economic growth which is also heading back to normal.
According to Katarina, fiscal policy in 2022, both in developed and developing countries, will remain accommodative and higher than the long-term average, although not as big as in 2020-2021. Heavier tightening will also occur in developed countries, where the fiscal deficit could fall from 8.8 percent to 4.8 percent of GDP, while in developing countries the deficit is expected to fall more narrowly from 6.6 percent to 5.7 percent of GDP. "Asia as an important world producer will play a very important role in the recovery of global supply chains in 2022. Normalization of growth and improvement of global supply chains will have a positive impact on the manufacturing sector and Asian financial markets," said Katarina. While tightening the Fed's policy will be a challenge to watch out for, Asia still has room for looser monetary policy, supported by more subdued inflation and high real interest rates that provide flexibility for central banks in the region. "The handling of the pandemic in several ASEAN countries, which initially tended to be relatively slow, made the economic recovery in 2021 not maximal, so the improvement is expected to continue in 2022," said Katarina. Meanwhile, Indonesia's inflation is expected to rise in 2022 triggered by several factors, such as stronger economic recovery momentum, the possibility of an increase in administered prices for fuel/electricity, the impact of the increase in VAT, and an increase in the price of raw materials charged to consumers, causing an increase in prices for selling price. However, compared to other countries, Indonesia is more insulated from the impact of rising commodity prices because Indonesia is a large producer of various commodities. "Despite the increase, inflation in 2022 is estimated to remain relatively under control, in the range of 3 percent to 1 percent, thus providing room for Bank Indonesia to continue implementing policies that support economic recovery," said Katarina.
