Remarks of President of the Republic of Indonesia at the 2023 United Overseas Bank (UOB) Economic Outlook at Hotel Indonesia Kempinski, DKI Jakarta province, September 29, 2022
Assalamualaikum warahmatullahi wabarakatuh,
Good morning, may peace be upon us all,
Greetings of Virtue.
Distinguished Coordinating Minister for Economic Affairs Airlangga Hartarto;
Distinguished Minister of Finance Sri Mulyani;
Distinguished President Director of UOB Indonesia Hendra Gunawan, all ranks of Board of Commissioners and Board of Directors of UOB Indonesia, as well as all managements;
Distinguished Ladies and Gentlemen, esteemed guests.
As I said earlier many times that the current global situation is in highly uncertainty, all countries face difficult situation, and the economy is hard to predict, to calculate. What will the direction be? Which recovery is possible? Problems arise one another and this “domino effect” is mostly told uncalculatable.
During the G7 Summit, I met with Chancellor Olaf Scholz, President Macron, Prime Minister Mario Draghi, President of the European Union Ursula at dinner reception, not in formal forum. From the meeting, I noticed that all countries experienced difficulties. I met with President of the Republic of Korea, President of China, Prime Minister of Japan too; I did notice that all countries are facing uncertainties.
Another even difficult situation was when I met with President Zelensky and President Putin. I held a discussion with President Zelensky for 1.5 hours while with President Putin for 2.5 hours. From the discussions I noticed that war will not stop tomorrow, next month, or next year. What does it mean? It is clearly uncertain.
To that end, our country must maintain its long endurance. I always said to Minister of Finance Sri Mulyani, “Ibu, we have to maintain the State Budget prudence.” Please be cautious, be prudent in spending the State Budget, the expenditure must be productive, must provide beneficial returns. Why do we have to do this? Because we know that almost all countries’ economies face weakening growth and contracted economy. Every day we always hear issues on energy, oil, and gas crises in almost all countries in the world as well as financial crisis which led to fluctuation in exchange rate.
In the last two days, due to policy on the State Budget in the UK, all countries were affected. We all know that, based on the calculation, our exchange rate is still good, even it weakened minus 7. We can compare with other countries, Japan recorded minus 25, China recorded minus 13, and the Philippines minus 15. We have to be grateful for it. In addition, we also still have to work hard.
The world also faces food crises that we have to be cautious. Around 345 million people in 82 countries suffer from severe starvation. All of you still can eat at the restaurant every day. Further 19,700 people died as a result of hunger. While we have to be grateful, alhamdulillah, since our food stock is still adequate to provide us every day.
In last August, we received acknowledgement from the International Rice Research Institute (IRRI) considering that since 2019 Indonesia has achieved rice self-sufficiency and our food security system has been sound. It must be maintained. It is also expected that we can produce more rice. Why do we now want to establish food estates? It is because we want to produce more food. Not only do we maintain our food security system, but we also can support other countries in terms of food issues. We can export.
Secondly, I noticed that Indonesia recorded relatively firm economic recovery. We can evaluate it one by one. This morning I received a report. Every morning I always receive report related calculations. I never have breakfast. Economic calculation is my every day’s breakfast.
We can observe that state revenue reached Rp1,764 trillion. It means that the value grew by 49 percent year on year (YoY). I also would like to say thank you to all tax payers because tax revenue reached Rp1,171 trillion or increased by 58 percent. It means that we still have tax payers and it increased by 58 percent. Customs revenue reached Rp206 trillion or grew by 30.5 percent. It grows significantly.
In addition, non-tax state revenue (PNBP) reached Rp386 trillion or grew by 38.9 percent. This is the calculation I received this morning. For further details, you can ask Minister of Finance; who had paid the tax? Who had paid customs? Where did non-tax state revenue come from? All of these mean that our people are still consistent and able to pay tax.
Consumers’ optimism is still on high position considering that Indonesia’s Consumer Confidence Index (CCI) reached 124.7 as per July standing at 123. This means there is optimism related to banking. Banking credit growth reached 10.7 percent. The balance of trade recorded surplus during 28 consecutive months. Last month’s trade surplus reached US$ 5.7 billion. Indeed, it is a huge amount. Indonesia’s Purchasing Managers’ Index (PMI) stood at 51.7, higher than that of global average.
Hence, if I am told to estimate, in the second quarter we could grow 5.44 percent. You may try to find the G20 countries that grew above 5. Our economic growth is the highest among the G20 countries. I would like to say that all of you have to stay optimistic. Do not be pessimistic. What we are facing is not an easy thing, but we still have to be optimistic. The second quarter is 5.44 percent; the third quarter is …. Let’s see. You can ask Minister of Finance, maybe she has different calculation. I also have my own calculation. Coordinating Minister for Economic Affairs also has his own calculator. It is my hope that the economy will grow from 5.4 to 6 percent in the third quarter.
Yes, that might be. I also have my own calculation, after asking the minister, I will inspect on the ground. I think, the economy in the third quarter will grow higher than the second one. It’s already the end of September. Yesterday I went to North Maluku province. From North Maluku province, I checked how much economic growth in the province? It can be 27 percent. Where did the number come from? I checked. Then, I checked the data from central bank Bank Indonesia (BI) and from the regional government. How was the number possible? I couldn’t believe it at first. After I checked the details, the number was right. Previously, the province only exported raw materials of nickel, now there is a smelter industry. This is why I have earlier said many times; downstreaming, downstreaming. Yes, because of it.
Thirdly, amidst difficult situation, as Mr. Hendra earlier said, we need to consistently improve the fundamentals including infrastructure. Because that is where we can improve our foundation in the medium and long term. Because it concerns future competitiveness. We would not be able to compete with other countries if we don’t have good connectivity. Roads, airports, ports, and power plants are key, fundamental keys if we wish to compete with other countries. If we can’t have those, if our infrastructure supply is low, we cannot compete with other countries.
First point is infrastructure. The second point is downstreaming. Do not let us only export raw materials, raw commodities. It must stop, but one by one. Nickel export was stopped, it led pros and cons. People came to me, I open to everyone. All said to me, “Mr. President, please be cautious that our export will decrease due to the ban of nickel export.”
About four years ago, our export of raw nickel was only US$1.1 billion, meaning our exports a year are only Rp15 trillion. After we stop the export, let’s check it in 2021. It’s US$20.9 billion. It jumped from 1.1 to US$20.9, from around Rp15 trillion to Rp360 trillion. After nickel, we will stop the export of lead, copper. We will stop the export of raw materials.
When I visited Buton, I checked, why do we still import asphalt? Around 5 million tons of asphalt every year, according to the report I received. We do have asphalt. After checking on the ground, we do not have the industry there. There is only one factory that can only produce 100 thousand tons of asphalt per year. We have the raw material, but we import it. How come? These mistakes must be stopped. Industrialization, downstreaming are opportunities.
If you hear one said, “What an opportunity to invest in asphalt industry!”, we just talked about domestic needs, if we talked about export, the amount will be gigantic. We have 662 million tons of asphalt deposits. We abandon it and we import it. Once again, this mistake must be stopped.
Another fundamental issue is food security, this energy security must be continually improved. We have achieved B30 energy security and it is expected to improve to B40 so that it can help improve energy security amid the current energy crisis. On food security, I have said earlier.
Fourthly, all countries are focusing on inflation. Today this is the problem of the whole countries in the world. All are afraid of inflation, the increase in goods and service prices becomes a tremendous fear. Let us check the number. Our inflation rate still stood, I notice, at 4.6 percent, let’s compare to other countries. Why can we maintain this? Because, in my opinion, Ministry of Finance as fiscal authority and BI as central bank go hand in hand and collaborate each other in a synchronic way.
Let us compare with other countries’ monetary authority and fiscal authority. Their central banks increased the interest rate, Ministries of Finance increased the deficit. What does it mean? It will circulate money to the market which means the increase in inflation. One side stopped the inflation, on the other side it increased inflation. That’s the difference.
As I said earlier, BI and Ministry of Finance go hand in hand, collaborate, synchronize each other. Consolidative State Budget, sound State Budget, brave to make decision. Many people recommended to me, “Mr. President, we have to boost our economy, we asked the House to increase the fiscal leeway more than 3 percent like during the crisis.”
Then I discussed with Minister of Finance, she explained her reasons. We agreed to maintain it under 3 percent. The most important thing is our State Budget is sound. It is vital. The central bank must be prudent to every situation, and consistent to every industry player. Most importantly, we can maintain stability.
Furthermore, I always tell the Minister that we must be wise, prudent in using every penny that we have. Don’t be wasteful and be fully cautious.
We shouldn’t think that the money is only for today or for this year. We must prepare for the future. All international observers say that next year will be more challenging but if we have good preparations, we can make it and we can manage the sustainability of the State Budget and the Regional Budget.
That concludes my remarks on this auspicious occasion. I thank you.
Wassalamu’alaikum warahmatullahi wabarakatuh.