Based on the Meeting of the Daily Executive Board of Kadin Indonesia
on 30 April 2024

As an umbrella organisation of the industrial and business world in Indonesia based on laws and functions as a forum for private sector aspirations, as well as a strategic partner of the government in the national economy in accordance with the mandate of Presidential Decree No. 18 of 2022, Kadin Indonesia continues to consistently carry out various work programs in order to support the performance of national entrepreneurs and encourage national economic growth.

Based on the results of the Kadin Indonesia Daily Executive Board Meeting on 30 April 2024, several collective notes were agreed upon as a reference for Kadin Indonesia's position and narrative related to global and national economic developments.

The following are notes related to global and domestic economic conditions that become Kadin Indonesia's standing position when dealing with relevant stakeholders:

Kadin Indonesia's narrative position

Looking at the current global and domestic economic developments, it can be seen that the pressure of external factors overshadows Indonesia's economic growth this year.

For this reason, Kadin through collaboration with various stakeholders continues to encourage the level of "Ease of Doing Business in Indonesia" and optimise the capacity of national entrepreneurs.

1. Global Economic Outlook

• After the COVID-19 pandemic in 2024, uncertainty has increased again due to the heating up of Russia-Ukraine geopolitical relations, the Israeli-Palestinian War, and the potential war between Israel and Iran in early 2024.
• In general, until April 2024, the global economy has been affected by several factors, namely:
  • The economic growth of major countries is still relatively low.
  • In the monetary sector, interest rate hikes are still occurring due to high core inflation. For example, the housing sector is the highest contributor to inflation in the US amidst the normalisation of energy prices. The US is careful to keep energy prices stable, otherwise headline inflation would rise to more than 3.5%.
  • Higher uncertainty in commodity prices in the trade sector due to Israel's attack on Iran, and Russia-Ukraine;
  • World Uncertainty Index is still rising.
• Due to the increased uncertainty caused by global factors, Kadin Indonesia projects 2 (two) scenarios of forecasting the value of Rupiah against US dollar in 2024.
  • Scenario 1, where the Iran-Israel War is only limited in nature as of today (as of 24 April 2024). It is projected that the exchange rate of the rupiah against the US dollar by the end of 2024 will be around IDR 16,399.
  • Scenario 2, where the Iran-Israel War worsens and continues to escalate. It is projected that the exchange rate of the rupiah against the US dollar will weaken further and by the end of 2024 could break Rp 17,099.

• Furthermore, the impact of the heated geopolitical tension in the Middle East triggered investors' risk off so that Gold as a "safe haven" experienced a price increase.
• Regarding interest rates, the Fed is expected to maintain its benchmark interest rate until the end of 2024.
• Finally, the inflation rate is expected to increase in early 2024. This happened following the anticipation of the Middle East conflict heating up.

2. Domestic Economy Overview

• Indonesia's economic growth was at a level of 5.05% (y-o-y) in 2023.
• Indonesia's GDP growth by sector, the leading sectors dominating Indonesia's GDP experienced a slowdown, namely Processing Industry, Trade, Agriculture, and Transportation.
• Economic growth from the demand side. There was an increase in government consumption, consumption of Non-Profit Institutions Serving Households (LNPRT), and Gross Regional Domestic Product (GDP) increased.
• Inflation aspect. Inflation experienced a significant increase in Q1 2024 (increasing at around 3%). In contrast, administered price inflation fell drastically since Q4 2023 when the government started to intervene, while core inflation remained relatively stable at 2%.
• Indonesia's foreign exchange reserves Bank Indonesia noted that Indonesia's foreign exchange reserves fell by USD 3.6 Billion due to higher US dollar pressure on the rupiah. However, Indonesia's foreign exchange reserves are still at a safe level. The amount of foreign exchange reserves as of March 2024 is still higher than March 2024. In addition, the trade balance still recorded a surplus in March-24 of USD 4.47 Billion.
• Bank Indonesia BI Rate increased to 6.25% in April 2024. This will result in an increase in savings and bank lending rates. Subsequently, this will result in an increase in the cost of borrowing.

For a detailed analysis of global and national economic developments as of April 2024, please click here.