Economists Estimates Indonesia's GDP Grows 5.02 Percent In The Second Quarter Of 2024

JAKARTA - Bank Permata economist Josua Pardede estimates that Indonesia's gross domestic product (GDP) in the second quarter of 2024 will grow by around 5.02 percent year on year (yoy).

"We expect Indonesia's GDP growth to slow down, but still around 5 percent yoy in the second quarter of 2024," said Josua, quoted from Antara, Saturday, August 3.

GDP growth in the second quarter of 2024 is projected to slow down compared to growth of 5.11 percent yoy in the first quarter of 2024.

Growth, which is still in the range of 5 percent, was mainly driven by domestic demand, which remained relatively strong despite a decline in external demand.

According to him, the weakening of external demand was largely due to the global economic slowdown, especially China, the country with the second-largest economy in the world and Indonesia's main trading partner, where growth slowed significantly from 5.3 percent yoy in the first quarter of 2024 to 4.7 percent yoy in the second quarter of 2024, which had a negative impact on export performance.

However, domestic demand is also expected to slow down in the second quarter of 2024 due to several factors, namely household consumption, government spending, and private investment.

Josua said the shift in the month of Ramadan from the second quarter to the first quarter of this year could reduce household consumption growth in the second quarter, which usually spiked during this period.

Because household consumption contributes more than half of Indonesia's economy, this shift can have an impact on GDP as a whole.

Furthermore, government spending is expected to slow down significantly in line with the normalization of spending after the 2024 General Election on February 24.

Meanwhile, private investment is likely to remain weak, as shown by the declining manufacturing PMI.

Based on S&P Global data, Indonesia's manufacturing PMI in July 2024 contracted 1.4 points on a monthly basis (month-to-month/mtm) to 49.3 from 50.7 in June.

This reflects a continuing "wait and see" approach among producers, driven by uncertainty over the new government's economic policy agenda and risks associated with the global economic slowdown, and the impact stemming from the risk of a "higher for longer" policy interest rate by the US (US) central bank or the Fed that causes rupiah weakening.

"We see that this is indeed hampering the business expansion plan," said Josua.

Previously, the Financial System Stability Committee (KSSK) projected that Indonesia's economic growth throughout 2024 would be in the range of 5.0 percent to 5.2 percent.

"We estimate Indonesia's economic growth for 2024 in the total range of 5.0 percent to 5.2 percent," said Finance Minister Sri Mulyani Indrawati at a KSSK press conference in Jakarta, Friday.

For the second quarter, KSSK predicts economic growth will be at the level of 5.0 percent. Although it has slowed down compared to the first quarter of 5.11 percent, the household consumption and investment sector which are the driving factors for economic performance are still maintained.

In order to maintain consumption performance, government spending on the State Revenue and Expenditure Budget (APBN) will continue to be directed to maintain price stability. The Ministry of Finance will also continue to encourage social protection programs, especially for vulnerable communities, so that purchasing power is maintained.