The Association of Southeast Asian Nations (ASEAN) plays a key role in the region. The amity and cooperation among the ten countries that make up the bloc are reasons for optimism in the region’s future growth. This year, Indonesia is hosting the ASEAN Summit in May. To welcome the Summit, Bank DBS Indonesia presented the Asian Insights Forum (AIF) with the theme “Indonesia’s Pivotal Role to ASEAN Economy”. The event was attended by Coordinating Minister for Maritime and Investment AffairsLuhut Binsar Pandjaitan, Economist and Former Minister of Finance Chatib Basri, Executive Director of Indonesian Political IndicatorBurhanuddin Muhtadi, and Managing Director and Chief Economist at DBS BankTaimur Baig.

President Director of PT Bank DBS Indonesia Lim Chu Chongsaid, “To support Indonesia as the chair of ASEAN, Bank DBS Indonesia is proud to present the Asian Insights Forum featuring experts who share their views on the economic and political conditions of Indonesia and Southeast Asia. We hope this event can contribute positively to the revival of the national economy and the welfare of the people. This is in accordance with Bank DBS Indonesia’s vision to be the Best Bank for a Better World as we strive to make a positive contribution to a better world.”

ASEAN recorded a total gross domestic product (GDP) of US$3.3 trillion in 2021, making it one of the five top economies, behind the US, China, Japan, and Germany. In 2022, ASEAN’s real GDP growth indicated a vibrant economic climate, touching 5.2%.

Managing Director and Chief Economist at DBS BankTaimur Baig on Indonesia’s economic potential in the region and globally, “Indonesia’s financial, banking and economic system, and its low dependence on global trade, make the [Indonesian] economy more resilient. Therefore, as we fret over the global outlook, we believe Indonesia is able to differentiate itself on a global scale as it has its own level of resilience in terms of macroeconomics and finance. Being the chair of ASEAN helps to solidify the rule-based trading system. I think being an ASEAN chair is an important step and I hope ASEAN moves forward in 2023 and beyond.”

Indonesia is the tenth largest economy in the world on a purchasing power parity (PPP) basis and ranks among the top 20 in the world in terms of nominal GDP. This is an indication that Indonesia has a strong influence on the international stage. Commenting on Indonesia’s role in ASEAN, Economist and Former Minister of Finance of the Republic of IndonesiaChatib Basrisaid, “Globally, Indonesia has maintained its good position. According to the International Monetary Fund (IMF), Indonesia will grow 4.6% in 2023 and is in a much better place than other Asian countries thanks to the government’s good policy responses.”

"We are grateful that Indonesia’s economy grew 5.3% in 2022, the highest in ASEAN, compared to, among others, Singapore (3.65%) and Thailand (2.59%). With the lowest recession probability, at 3%, Indonesia is 97% relatively recession-proof. Indonesia has established 16 priority economic deliverables that fall into three strategic focuses, namely recovery rebuilding, digital economy, and sustainability. Meanwhile, Indonesia's main strategy is to increase economic integration and strengthen ASEAN competitiveness, to realise ASEAN as a centre of economic growth," said Coordinating Minister for Economic Affairs of the Republic of IndonesiaAirlangga Hartarto.

In the wake of the pandemic, real GDP has bounced back, with a growth rate expected to average 5% this year and next to the pre-COVID-19 five-year average. By 2023, Indonesia's growth rate is likely to be one of the strongest among ASEAN-6 (Indonesia, Malaysia, the Philippines, Singapore, Thailand, Vietnam), alongside the Philippines and Vietnam. Indonesia’s growth is also supported by the government's industrial downstreaming programme. As a nickel ore exporter, Indonesia earned US$1.1 billion or around Rp17 trillion per year. Since switching to refined nickel products, Indonesia has benefitted by US$33 billion or Rp450 trillion.

Following Indonesia's successful leadership of the G20 and its summit in Bali in 2022, which generated Rp125 trillion in investment, the ASEAN Summit should also have a positive impact on Indonesia's economic growth. Coordinating Minister for Maritime and Investment Affairs of the Republic of Indonesia Luhut Binsar Pandjaitan underlined Indonesia's economic revival. "Industrial downstreaming and digitalisation greatly benefit the government’s effort to boost economic growth. Digitalisation has helped the government cut costs by up to 30%."

On the other hand, besides recession and inflation, political issues such as competition in the presidential elections can lead to fluctuations in the national economic climate (or economic fluctuations). Executive Director of Indonesian Political Indicator Burhanuddin Muhtadi said, "From the public’s perspective, actually the 2024 elections are a done deal with several names nominated as presidential candidates, but that is not the case with the elite. There are still uncertainties that should be addressed by political parties."

Burhanuddin Muhtadi added that presidential candidates have not formulated concrete programmes because some political parties have yet to select their candidates. Subsequently, all parties concerned will scramble to hit the pause button on structural reform at the national and local levels. Nevertheless, people need not to worry too much despite economic uncertainties. In general, the market situation will quickly improve after the elections, regardless of the outcome.

About DBS

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DBS Asian Insights Forum: As Chair of ASEAN Summit 2023, Indonesia could turbocharge Southeast Asia’s economy