World Bank Raises Indonesia’s GDP Projection, Cuts Global Projection

Jakarta, – The World Bank cut its global growth forecasts for 2022 and 2023, warning that rising inflation, debt and income inequality could jeopardize economic recovery in developing countries.

In the World Bank’s “Global Economic Prospects” report, global growth is forecast to slow 0.2 percentage point to 4.1% in 2022 and 3.2% in 2023 as more countries begin to shed fiscal and monetary policy support aimed at mitigating the impact from the coronavirus pandemic.

The projections are based on a strong recovery in global growth as demand surges after the lockdowns are lifted. The World Bank estimates that the world economy will grow 5.5% in 2021.

Major economies including the United States, China and countries in Europe are expected to slow down this year. The World Bank added that the rise in Covid infections, due to the highly contagious variant of Omicron, is likely to disrupt economic activity in the near term and could worsen growth projections if it continues.

Indonesia’s GDP is estimated to grow 3.7% in 2021, or 0.7 percentage points lower than the previous projection in June 2021. 2022 GDP is estimated to grow 5.2% or 0.2 percentage points higher than the June projection. GDP 2023 is projected at 5.1%.

Ongoing supply chain disruptions, rising inflationary pressures and rising levels of financial vulnerability in much of the world could increase the risk of a “hard landing”, the World Bank warned. A hard landing refers to a sharp economic slowdown after a period of rapid growth.

The World Bank is the first major global institution this year to issue growth projections. The International Monetary Fund is expected to release its updated World Economic Outlook on January 25, Reuters reports.

Growth in China will ease from around 8% in 2021 to 5.1% this year, partly due to the lingering effects of the pandemic as well as additional regulatory tightening from Beijing, according to the World Bank.

Developed economies are expected to slow from 5% in 2021 to 3.8% in 2022, which the World Bank says is “sufficient to return aggregate output of advanced economies to pre-pandemic trends by 2023 and thus complete the recovery cycle.”

On the other hand, the production of developing countries is expected to weaken due to the pandemic. The growth direction of developing countries will not be strong enough to return investment or output to pre-pandemic levels by 2023, according to the report.

Developing economies are expected to slow from an estimated 6.3 percent last year to 4.6 percent in 2022. For some small countries or even those that rely heavily on tourism, economic output is expected to remain below pre-pandemic levels, the World Bank said.