Sri Mulyani Prepares Policies To Tighten Economic Growth In 2024

JAKARTA In the midst of the global economic prospects that are relatively stagnant and full of uncertainty, Indonesia's economy in the second quarter of 2024 grew 5.05 percent (yoy) supported by strong domestic demand and increased export performance.

Minister of Finance Sri Mulyani Indrawati said that in the midst of various challenges in global conditions, this result maintains optimism for national economic performance targets, we see household consumption and investments make a good contribution, on the other hand exports also still show good performance.

"Of course in the future, the Government will continue to prepare various policies and strategies to ensure inclusive and sustainable growth," he said in his statement, quoted on Tuesday, August 6.

In terms of expenditure, Household Consumption grew by 4.93 percent (yoy) driven by the holiday period for religious holidays and longer school holidays.

In addition, people's purchasing power is maintained in line with controlled inflation, increased ASN salaries, providing 13th salary with a 100 percent performance allowance, and creating bigger new jobs in early 2024 of 3.55 million.

Meanwhile, Government consumption grew positively by 1.42 percent, although the base was very high in the same period last year of 10.47 percent. This is mainly supported by the absorption of high enough Goods and Expenditures, respectively at 39.5 percent and 6.1 percent.

"The high growth in government consumption in the second quarter of last year mainly due to THR and 13 ASN salaries given in April and June, while this year it will be given in March and June," he said.

Investment (Gross Fixed Capital Formation) recorded a growth of 4.43 percent (yoy) supported by the growth performance of building investment which grew 5.31 percent.

Sri Mulyani conveyed that the high absorption of government capital expenditures related to the completion of various National Strategic Projects (PSN), including the development of the Capital City of the Archipelago (IKN) is one of the driving factors for increasing investment.

Sri Mulyani explained that the activities of the private sector property construction continue to show an increasing trend closely related to the Government-Borrowed Value Added Tax (PPN DTP) housing policy.

Meanwhile, investment activities related to machine and equipment components grew 6.08 percent. Strong private investment activities can also be seen from the performance of PMA and PMDN realization which grew 22.49 percent and Manufacturing PMI which was in the expansion zone throughout the second quarter. The lack of wait and see sentiment after the election contributed to encouraging investment activities.

On the other hand, the export performance of goods and services in the second quarter of 2024 grew by 8.28 percent (yoy), an increase compared to the previous quarter which grew 1.37 percent.

In terms of production, all sectors grew positively in the second quarter of 2024. The Manufacturing sector grew by 3.95 percent (yoy). Industry-related downstream such as the basic metal processing industry and the non-metal-growing metal goods industry.

Sri Mulyani said that the food and beverage industry, which is the largest contributor to the manufacturing sector, grew 5.53 percent. On the other hand, the textile and finished clothing industry and the footwear industry are growing slowly as global demand weakens.

Another main sector, the Trade Sector grew by 4.86 percent (yoy) higher compared to the previous quarter in line with strong public consumption.

"This is reflected in the growth of the Large and Retail Non-Car and Motorcycle Trading Sub-sector which recorded growth of 5.92 percent, higher than the previous quarter of 5.67 percent," he explained.

On the other hand, the Mining Sector has experienced a slowdown, especially related to the decline in oil and gas and coal production.

Sri Mulyani said the decline in oil and gas production was mainly due to a natural decline in oil and gas production from old wells. Meanwhile, the decline in coal production is closely related to the continued decline in coal prices.

Overall, Sri Mulyani conveyed that the performance of resilient and consistent economic growth above 5 percent had a significant impact on the welfare of the community.

"The unemployment rate has decreased from 5.45 percent in 2023 to 4.82 percent this year, while the poverty rate has also continued to decline from 9.36 percent to 9.03 percent," he said.

Sri Mulyani said the government would continue to monitor the risk of global economic stagnation which is expected to continue throughout 2024.

"The 2024 state budget will continue to be optimized to maintain stability and momentum for economic growth so that the growth target of 5.2 percent can be achieved," he said.

In addition, Sri Mulyani explained that various efforts to strengthen economic fundamentals continue to be carried out through economic transformation, strengthening food security, developing renewable energy, downstreaming, increasing labor productivity, as well as improving the investment and business climate in the context of accelerating long medium-term economic growth.