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Amid its accelerated recovery, Indonesia gets key World Bank project

The World Bank, businesses, and PLN will contribute to its funding, including money from the Clean Technology Fund and the Canada Clean Energy and Forest Climate Facility

The World Bank has authorized a USD 1.14 billion project to increase Indonesians’ access to cleaner electricity, for which it will contribute USD 500 million in funding, as well as a program to improve children’s nutrition, for which it will contribute USD 600 million.

According to a statement from the World Bank, the project will help Indonesia’s state utility, Perusahaan Listrik Negara (PLN), in terms of expanding its capacity to manage the energy transition, link roughly 2 million people in eastern Indonesia to the electrical grid, increase solar power investment, and more.

The World Bank, businesses, and PLN will contribute to its funding, including money from the Clean Technology Fund and the Canada Clean Energy and Forest Climate Facility.

Manuela V. Ferro, vice president of the World Bank for East Asia and the Pacific, stated that the project “will mobilize private sector investment for Indonesia’s energy transformation and help communities adapt to climate change.”

Most of Indonesia’s electricity comes from coal, and the country wants to reduce emissions by 32% by 2030 and to zero by 2060.

In a separate announcement, the World Bank announced that it had approved USD 600 million in funding for Indonesia’s initiatives to reduce stunting in children’s growth, a type of malnutrition.

According to a government poll released in January 2022, 4.5 million Indonesian children under five, or roughly 21% of all children, they had stunted growth.

According to Indonesian President Joko Widodo, the nation hopes to reduce the ratio to 14% in 2024.

Talking about Indonesia, the country’s economic growth held steady in the 2023 first quarter as improving consumption and rising spending from the Widodo government managed to offset a slowdown in exports and investment in South-East Asia’s largest economy.

The country’s GDP expanded by 5.03% in the January to March 2023 quarter from 2022, data from Statistics Indonesia showed. The GDP expansion ratio also beat the 4.95% median forecast made by a Reuters poll, apart from bettering the 5.01% growth registered in the fourth quarter of 2022-23 FY.

Indonesia’s post-pandemic recovery has been helped by a commodities-led export boom, reported Aljazeera. However, analysts now expect this economic momentum to cool down as commodity prices ease and monetary policy tightening from the central banks around the world affects global demand.

Bank Indonesia’s hiked its interest rate between August and January of the 2022-23 FY, by 225 basis points to fight inflation. As per analysts, this could also hit the country’s domestic demand.

The central bank has, however, paused the monetary policy tightening since January 2023, leaving room for debates among experts on whether BI would keep interest rates unchanged for the rest of 2023, or would go for policy easing by 2024.

From January to March 2023, growth in household consumption, which accounts for more than half of GDP, picked up to 4.54%, compared with 4.48% in the previous three months, while government spending rose 4% against a contraction previously.

Export growth softened to 11.68% from nearly 15% in the 2022-23 FY fourth quarter. However, the global demand for products like coal, palm oil and metals remained strong.

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