Enhancing BAPPENAS’ Economic Modelling and Forecasting
ARISE+ Indonesia has worked in close collaboration with Oxford Economics to strengthen BAPPENAS’ analytical skills, through the upgrade of two key economic models and delivered technical assistance in conducting economic, trade and investment analysis.
The Global Economic Model and the Inter-regional Trade Model were first developed with the support of the EU-Indonesia TCF and have consistently been employed by BAPPENAS in supporting the development of Indonesia’s National Medium-Term Development Plans and in producing various types of economic analysis and reports, such as economic outlooks and economic impact studies of trade and investment measures.
The technical assistance activities delivered have proven to be relevant and timely following the outbreak of the pandemic and the economic crisis that followed, as developing sound economic, trade and investment policy based on the analysis of alternative scenarios is critical to navigate challenges and ensure rapid economic recovery through appropriate policies. In particular, the model has been applied to formulate economic recovery policies in relation to six sectors, including the chemical and the electric vehicle industry.
The Global Economic Model and the Inter-regional Trade Model were first developed with the support of the EU-Indonesia TCF and have consistently been employed by BAPPENAS in supporting the development of Indonesia’s National Medium-Term Development Plans and in producing various types of economic analysis and reports, such as economic outlooks and economic impact studies of trade and investment measures.
The technical assistance activities delivered have proven to be relevant and timely following the outbreak of the pandemic and the economic crisis that followed, as developing sound economic, trade and investment policy based on the analysis of alternative scenarios is critical to navigate challenges and ensure rapid economic recovery through appropriate policies. In particular, the model has been applied to formulate economic recovery policies in relation to six sectors, including the chemical and the electric vehicle industry.
ARISE+ Indonesia has supported BAPPENAS to further enhance the economic models with additions of a range of energy and emissions variables relevant to climate and environmental policy. These include energy demand by energy-use sector (power generation, industry, transportation, residential and commercial services) by fuel type, as well as carbon emissions, and the implementation of a carbon tax variable and associated policy levers.
These have several potential policy applications, which include:
- Assessing trade-offs between competitiveness and carbon emissions from introduction of a carbon tax. Because a carbon tax adds to the cost of energy, it will undermine Indonesia’s competitiveness in energy-intensive sectors. How does this impact trade and the balance of payments? Running a range of scenarios has allowed BAPPENAS to map the trade off between growth and emissions.
- Simulate alternative economic development pathways for Indonesia and compliance to Nationally-Determined Contributions (NDC). How do targets set out in Medium Term Development plan for the growth of different economic sectors impact on carbon emissions trajectory, and NDC compliance?
Through the introduction of policy levers to use carbon tax revenues BAPPENAS can decide how best to use carbon tax revenues. For instance revenues could be directed to low-income households to support consumers, or used to boost government investment for long-term growth, or some combination in-between.
These activities have been conducted in collaboration with Oxford Economics, a leader in global forecasting and quantitative analysis, offering support to governments, international corporations, financial institutions and universities. With offices around the world, Oxford Economics offers best-in-class global economic and industry models and analytical tools that provide an unmatched ability to forecast external market trends and assess their economic, social and business impact.
These activities have been conducted in collaboration with Oxford Economics, a leader in global forecasting and quantitative analysis, offering support to governments, international corporations, financial institutions and universities. With offices around the world, Oxford Economics offers best-in-class global economic and industry models and analytical tools that provide an unmatched ability to forecast external market trends and assess their economic, social and business impact.
