The ADB’s report also predicts inflation in Indonesia would be higher at four percent by the end of 2022 compared to the ADB's projection in April 2022 of 3.6 percent, due to high commodity prices.

Jakarta (Indonesia Window) – The Asian Development Bank (ADB) has raised Indonesia's growth projection for 2022 from 5.0 percent to 5.2 percent, reflecting strong domestic and export demands.

The revised projection is mentioned in the new release of the July 2022 Asian Development Outlook (ADO) supplement.

"The economic activity in Indonesia continues to return to normal, while COVID-19 infections are still under control, despite the recent increase in the number of cases," the ADB’s Director for Indonesia Jiro Tominaga said in a statement here on Thursday (July 21), as quoted by Indonesia’s news agency Antara.

The ADB reports that economic activity in the country continues to be normal and COVID-19 infections remain under control. Improvements in jobs, incomes and confidence have triggered the private consumption, while healthy demand and rising credit have boosted the private investment.

However, the fiscal policy has become less supportive as pandemic-related spending is reduced.

Higher prices for key commodity exports, such as coal, palm oil and nickel, generate unexpected export earnings and fiscal revenues, more than an effort to offset higher fiscal subsidies for the fuel, electricity and food sectors.

The revision of Indonesia's growth forecast in the ADO supplement is also in line with the rising growth projections of Southeast Asia. For the region, the ADB projects five percent growth in 2022, up from April's projection of 4.9 percent.

The ADB report also predicts inflation in Indonesia would be higher at four percent by the end of 2022 compared to the ADB's projection in April 2022 of 3.6 percent due to high commodity prices.

"The increase in inflation lowers the household purchasing power, but high prices for a number of key export commodities have benefited from export earnings and fiscal revenues, allowing the government to provide assistance amid rising food, electricity and fuel prices, while still reducing the budget deficit," Tominaga said.

Meanwhile, for 2023, the ADB projects that the Indonesian economy is expected to grow steadily at 5.3 percent and inflation may fall again in the range of 3.3 percent.

Reporting by Indonesia Window