Indonesia's Economy Is Estimated To Grow 4.9 Percent In 2024

Rupiah (Photo: Antara)

JAKARTA - Indonesia's Gross Domestic Product Growth (GDP) rose 5.04 percent (YoY) in the fourth quarter of 2023, in line with the 5 percent consensus estimate in the Bloomberg survey and higher than the 4.94 percent growth recorded in the third quarter of 2023.

Meanwhile, this brings GDP growth in 2023 to 5.05 percent, in line with the estimated consensus of 5.03 percent, but far below the government's target of 5.3 percent for 2023.

Head of Institutional Research Sinarmas Sekuritas Isfhan Helmy said GDP is in accordance with his party's expectations and componently, all items in GDP meet expectations of 100 percent of the full year projection, except for exports that exceed the estimate of 2 percent of the full year projection.

Isfhan said that GDP growth was driven by exports and investment, while consumption remained sluggish because the campaign switched to social media.

In addition, household consumption that accounts for more than half of GDP only rose 4.5 percent in the fourth quarter of 2023, the lowest rate in nearly two years with upper middle class people shifting spending from the consumptive to productive sectors.

Investasi, yang merupakan kontributor terbesar kedua terhadap pertumbuhan PDB, naik 5,02 persen pada kuartal IV 2023, sedikit lebih rendah dari pertumbuhan 5,8 persen pada kuartal III 2023," jelasnya dalam keterangan resminya, Rabu, 7 Februari 2024.

Meanwhile, exports managed to record an expansion of 1.6 percent in the fourth quarter of 2023, after two consecutive quarters of contraction. In addition, government spending rose 2.8 percent, reversing the contraction in the third quarter of 2023.

In the future, Isfhan estimates household consumption will continue to slow down, along with lower expectations of export revenue this year.

"So we revised our GDP growth forecast to 4.9 percent for the previous 2024 5 percent," he said.

According to Ishfan, the main driver of the 2024 economic growth rate will come from investments which we estimate will grow close to 6 percent, there is also little hope that household consumption will improve by close to 5 percent.

Ishfan explained that this would be a balancing factor amidst the estimated weakening of external factors marked by the depletion of the trade balance surplus. The 2024 GDP growth rate will be lower than the achievement throughout 2023, where the Indonesian economy grew 5.05 percent.

Ishfan said GDP growth in 2023 had slowed down far from 5.3 percent in 2022 due to weaker export growth, only up 1.3 percent last year, down sharply from 16.2 percent in 2022.

Meanwhile, household consumption rose 4.8 percent last year compared to 4.94 percent in 2022. commodity prices fell last year after surging in 2022, causing major export commodities, such as coal, palm oil, and nickel, to have a lower value.

"For 2024, we now estimate that the contribution of external balances is negative to GDP, as the trade balance prospect looks more gloomy this year. A weak global economy can also make export shipments sluggish," he said.

In addition, the risk to the economy remains because food inflation increased in January while volatile rupiah might make Bank Indonesia be careful to cut interest rates in the first semester of 2024, with the probability of cutting interest rates higher in the second semester of 2024.

"Overall, we estimate that GDP growth of 4.9 percent in 2024, supported by the 'Domestic Demand' growth of 5 percent, but will be eroded by negative contributions from the 'external balance' factor which makes GDP growth overall slightly lower," said Ishfan.