Global economic growth in 2023 was relatively low and shadowed by inflationary pressures, geopolitical factors, and the threat of climate change. Strategic competition between the United States and China, the Russia-Ukraine, and the Middle East conflicts, as well as tensions in the South China Sea have been and will still be sources of uncertainty in the next few years. However, several international organizations remain optimistic and predict that Indonesia's economic growth will be above the world average. Several factors that should be considered include external pressures due to high world interest rates, China's economic slowdown and the government's fiscal discipline. To spur high and sustainable economic growth, economic reform is needed, including adjusting fuel subsidies to encourage energy transition. 

 

Records show that both global trade and investment trends in 2023 have slowed down. Success in managing geopolitical risks becomes the key to benefit from the trend of derisking or rerouting global value chains. Indonesia is yet to take advantage of this. However, Indonesia has the potential to push the economic reform agenda through by utilizing peer pressure from members of international economic cooperation, including OECD which it aspires to join in the next three years. 

 

Global foreign investment, which had the tendency to decline in 2023, reveals the gap between developed and developing countries. Geopolitical tensions put developing countries in a difficult position to obtain foreign investment to sustain their economic growth. Notwithstanding, Indonesia continues as one of the main investment destinations in ASEAN. Indonesia should optimize its investment potential e.g., in the energy transition sector while considering sustainable downstream policies as well as emphasizing the importance of diversification. 

 

Sustainable trade has the potential to raise global and Indonesian trade. The growth of sustainable trade and investment is higher than that of trade and investment in general. For this reason, there is a need for global initiatives and stronger international cooperation to reduce trade barriers such as tariffs in developing countries and non-tariffs in developed countries. Meanwhile, strategic competition which encourages unilateral policies will remain a source of uncertainty which slows down the economic decarbonization program. 

 

Indonesia needs a more facilitative trade policy to improve its competitiveness in sustainable trade. Compared to its neighboring countries, Indonesia has been lagging in this regard. Meanwhile, notwithstanding a trend of increased sustainable investment, financing disparities between developed and developing countries are, nevertheless, persisted. Nonetheless, Indonesia has a great potential to develop a market for environmentally friendly bonds as evident from the significant increase in the value of its green bonds issued in 2023 compared to that in 2019.