The government is increasingly concerned about the dynamics of the global economy, which are constantly exposed to pressure. The escalation of geopolitical tensions and rising global oil prices are potential factors that could undermine Indonesia's economic growth.

Airlangga Hartarto, the Coordinating Minister for Economic Affairs, acknowledges that the world still faces various risks and uncertainties. Some of the concerns include the slowing economic growth in China, commodity price volatility, geopolitical tensions in Ukraine and Russia, the Israel-Palestine conflict, economic fragmentation, El Nino and climate change threats, debt distress risks, a global decline in the Manufacturing PMI index, and rising global oil prices.

These conditions have led to uneven global economic growth. The 2023 projections indicate global growth of only around 2.9 percent, expected to decrease to 2.8 percent in the following year.

According to Airlangga, this global economic slowdown is likely to increase the risks to achieving Indonesia's economic growth targets in the fourth quarter of 2023. Even in 2024, the increased global risks are expected to have a significant impact on Indonesia's economic growth, which had previously been targeted at 5.2 percent.

"Due to the global economic slowdown and various global risks and uncertainties, the risks to achieving Indonesia's economic growth targets in the fourth quarter of 2023 and in 2024 are increasing," Airlangga said in a written statement on Sunday, October 22, 2023.

Nevertheless, Airlangga remains optimistic that Indonesia still has a strong economic foundation, as evidenced by national economic growth surpassing five percent for seven consecutive quarters. Additionally, inflation in Indonesia in September 2023 remains low, at approximately 2.28 percent (year on year), the lowest since February 2022.

The Manufacturing PMI index remains at an expansive level, and public optimism about the Consumer Confidence Index (CCI) is still relatively high. Real Sales Index continues to grow positively, and the trade balance in September 2023 records a surplus of USD 3.42 billion, maintaining a surplus for 41 consecutive months.

The Need for Vigorous Efforts in Attracting Investments

To achieve the economic growth target of approximately 5.3 percent (year on year) in 2023, the government continues to make vigorous efforts to attract investors to invest in Indonesia.

Airlangga estimates that an investment of approximately IDR 6.189.10 trillion is required, with the majority coming from the public, accounting for 84.7 percent, followed by 9.7 percent from the government, and the rest from State-Owned Enterprises (BUMN).

Meanwhile, to achieve the economic growth target of approximately 5.2 percent (year on year) in 2024, the required investment from various economic players is estimated to be around IDR 6.900 trillion.

"In terms of investment sources, this need can be met through government investments, the banking sector, the capital market, State-Owned Enterprises' capital expenditure, capital injection, and corporate internal financing," he explained.

With the hope of achieving the economic growth target and the investment needs, the Foreign Direct Investment (FDI) and Domestic Direct Investment (DDI) sectors in 2024 are expected to contribute approximately IDR 1.6 trillion. Based on the 2022 realization and 2023 target share, Airlangga explained that FDI and DDI are expected to contribute around 22 percent of the total investment requirement.

In addition to considering historical data and the need to achieve the growth target, several other factors are also taken into account, including the implementation of the Job Creation Law, various policies promoting ease of doing business, significant investment needs to support economic diversification and energy transition, and the investment required to complete various National Strategic Projects (PSN).

Considering these conditions, in the Limited Meeting on Macroeconomic Policy (KEM) and Fiscal Policy Principles (PPKF) for 2024 in February 2023, President Joko Widodo discussed the target of attracting investments amounting to IDR 1.65 trillion for 2024.

"The government, investors, associations, business players, the banking sector, and the media all play a very important role in strengthening the optimism of Indonesia's economic development. All parties are expected to collaborate and make their best contributions in the face of various global challenges that are not to be taken lightly," emphasized Airlangga.