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Appreciating Indonesia’s Economic Growth Amidst the Global Economic Slowdown

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Indonesia’s economic growth remains strong amidst the global economic slowdown. Data from the Central Statistics Agency (BPS) shows that economic growth in the fourth quarter of 2023 grew by 5.04% (yoy), an increase compared to growth in the previous quarter of 4.94% (yoy). With these developments, Indonesia’s overall economic growth in 2023 recorded strong growth of 5.05% (yoy).

With these achievements, Indonesia is able to become one of the countries that grows strongly and consistently at a high level compared to a number of other countries. This national economic growth was able to surpass several peer countries such as Malaysia and South Korea, and was higher than the economic growth of G-20 countries such as the United States (US), France and Germany.

Bank Indonesia (BI) assesses that Indonesia’s economic growth remains strong amidst the global economic slowdown. Going forward, Bank Indonesia (BI) stated that it would continue to support efforts to encourage national economic growth.

Head of the Communications Department of Bank Indonesia (BI), Erwin Haryono, said that economic growth was supported by domestic demand, marked by continued growth in consumption. The holding of elections and increasing investment, especially in buildings, have helped support Indonesia’s economic growth. BI will continue to strengthen the synergy of the Government’s fiscal stimulus with BI’s macroprudential stimulus. This synergy is to encourage economic growth, especially from the domestic demand side.

The Coordinating Minister for Economic Affairs (Menko Ekonomi), Airlangga Hartarto, said that the economic growth figure was higher than the initial consensus estimate, where initially his party estimated that economic growth in 2023 would only be 5.03 percent. In fact, Indonesia’s economic growth is better than the economic growth of other countries.

Airlangga also said that increasing economic growth in the fourth quarter of 2023 was supported by almost all components of Gross Domestic Product (GDP) growth. Household consumption grew by 4.47% (yoy) in line with increased mobility, especially during the National Religious Holidays (HBKN) Christmas and New Year, stable public purchasing power, and increasing consumer confidence. Consumption of Non-Profit Institutions Serving Households (LNPRT) grew high by 18.11% (yoy) driven by increased election preparation activities.

Government consumption increased by growing by 2.81% (yoy) driven by goods spending and personnel spending. Investment grew by 5.02% (yoy) mainly supported by building investment as infrastructure development continued and investment activity increased.

Meanwhile, exports grew by 1.64% (yoy) supported by demand from main trading partners which continued to grow positively amidst the decline in prices of leading export commodities, as well as improving service exports in line with the increase in the number of foreign tourists.

Increased economic growth is also reflected in the Business Field (LU) and spatial aspects. All LU in the fourth quarter of 2023 showed positive performance with high growth recorded in sectors related to mobility, especially Transportation and Warehousing, Provision of Accommodation and Food and Drink, as well as Wholesale and Retail Trade.

LU Processing Industry as the main contributor to growth also grew well in line with strong domestic and global demand. Meanwhile, spatially, economic growth in the fourth quarter of 2023 in most regions of Indonesia was higher than the growth in the previous quarter.

Airlangga also said that economic growth throughout 2023 which showed impressive performance was also supported by the household consumption expenditure component which grew by 4.82% and Gross Fixed Capital Formation (PMTB) which reached 4.40%. Furthermore, in terms of the business sector, the sectors that experienced significant growth were transportation and warehousing at 13.96%.

Maintained growth in household consumption and Gross Fixed Capital Formation (PMTB), as well as increased growth in the construction sector are implications of the government’s efforts to stimulate the national economy.

In the future, the national economic outlook is also considered to still have optimal achievements as shown by the Indonesian Manufacturing PMI figure which continues to be at an expansionary level in January 2024 of 52.9. This provides optimism that the national economy is getting better and will provide capital for achieving future economic targets in line with projected improvements in the global economy. Therefore, the sustainable policies taken are the key to future economic growth, concluded Coordinating Minister Airlangga Hartarto.

In order to ensure future economic stability and resilience, a number of priority policies have been prepared by the government, such as the revitalization of conventional machinery by increasing productivity and competitiveness with the Pre-Employment Card Program, vocational training and implementation of the Job Creation Law, infrastructure development by continuing the National Strategic Project (PSN) , construction of Integrated Motorway (MRT) and high-speed trains, Special Economic Zones (KEK), Archipelago Capital (IKN), as well as Agrarian Reform, expanding international cooperation, and strengthening food security.

Apart from that, the government will also encourage a new economic engine through digitalization, sustainable energy transition, industrialization with downstreaming which can increase economic added value. Furthermore, the government will also strengthen social resilience and community economic empowerment through various social protections, including maintaining the purchasing power of vulnerable communities, micro-financing and cash-intensive labor.

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