The World Bank highlighted the high debt growth of countries in the Asia and Pacific region, which has the potential to suppress the region’s economic growth rate in 2024. However, Indonesia actually received praise from the World Bank.
World Bank Chief Economist for the East Asia and Pacific Region, Aaditya Mattoo, said that the swelling debt of countries in this region occurred especially after the Covid-19 pandemic, resulting in limited fiscal space, hampered public investment, and burdened private investment due to high interest rates.
High corporate debt also hurts private investment because it leaves companies with fewer resources for new projects. High household debt servicing costs also erode disposable income and harm consumption.
“So areas that are known as economical areas are now experiencing very high levels of debt. This high debt is not only shown by one country or government but also in the corporate or household sector,” said Mattoo during an online press conference, Monday ( 2/10/2023).
Mattoo noted that this high increase in debt levels has occurred in the region in the last decade. For example, the level of Indonesian government debt from 2010 was only 25% of GDP to now reaching 39% of GDP. China from 25% to 51%, Thailand from 28% to 54%, and Malaysia from 48% to 60% of its GDP.
Then, household debt for Indonesia rose from 14% to 16% of GDP, and China from 27% to 62%, to Thailand from 59% to 86%. Meanwhile, non-financial corporate debt also increased, such as Indonesia from 15% to 25%, China from 115% to 172%, and Vietnam from 74% to 112%.
However, Mattoo emphasized that for Indonesia, the debt level is still at a safe level and does not pose any bad risks in the future. The level of debt to GDP ratio is still far below the provisions of Law Number 17 of 2003 concerning State Finance which limits it to a maximum of 60% of GDP.
“The Indonesian government implemented a very careful and frugal fiscal policy, Indonesia was one of the first countries to consolidate and withdraw support (debt payments) that had been provided during the Covid-19 pandemic,” said Mattoo.
In the Macro Poverty Outlook for East Asia and the Pacific, the World Bank also estimates that Indonesia’s debt level to GDP in 2023 will only be 39.1%, then become 39% in 2024, and 38.4% in 2025. It continues to shrink from that level. 2021 which reached 40.7%, and is still below the 2020 level of 39.3% and the 2022 realization of 39.5%.
In terms of the APBN deficit, the World Bank also estimates that the amount will continue to be maintained at around 2%, from the 2020 level of a deficit of 6.1% of GDP, to a deficit of 4.6% of GDP in 2021, then 2.4% in 2022, 2 .2% in 2023, 2.3% in 2024, and a deficit of 2.3% in 2025.
“Indonesia is also a country that has used fuel subsidies but removed them gradually in a relatively quick time. So in my opinion, I don’t see this level of debt as a big source of risk,” he said.
Source : CNBC
