Indonesian economy sees solid growth in Q4 2023

According to Bank Indonesia (BI), despite a slowdown in the global economy, Indonesia's economy expanded strongly in the fourth quarter of 2023. "In spite of the global economic slowdown, Indonesia's economic growth is robust," stated Erwin Haryono, head of BI's communication department, in Jakarta on Tuesday. In the fourth quarter of 2023, Indonesia's GDP increased by 5.04 percent year over year (yoy), higher than the 4.94 percent yoy growth in the previous quarter, according to figures released by Statistics Indonesia (BPS). With the rise, Indonesia's GDP grew at a strong rate in 2023, reaching 5.05 percent year over year. Forecasts for 2024 indicate that the country's economy will expand by 4.7–5.5 percent. This growth will be fueled by domestic demand, which includes the country's ongoing consumption growth, the election's positive effects, and a rise in construction investment in line with the ongoing development of National Strategic Projects (PSN), particularly the Nusantara capital city (IKN).

Haryono went on to say that the weak global economy and falling commodity prices will likely result in weak export performance. Through macroprudential stimulation, BI continuously improves the government's fiscal stimulus synergy to promote economic growth, particularly through domestic demand. Almost all of the GDP's components contributed to Indonesia's economic development in the fourth quarter of 2023.

Year over year, household consumption grew by 4.47 percent. In addition, there was an improvement in consumer confidence, consistent purchasing power, and mobility during the Christmas and New Year holidays. Because of election-related preparations, the consumption of Non-Profit Institutions Serving Households (LNPRT) rose sharply to 18.11 percent (yoy). Additionally, 2.81 percent (yoy) more was consumed by the government, mostly as a result of personnel and product spending. Construction investment increased 5.02 percent year over year, in tandem with the ongoing development of infrastructure and the upsurge in capital investment activities. In the meantime, exports increased 1.64 percent year over year due to demand from major trading partners and continued to develop positively even as the prices of the primary export commodities declined. As the number of foreign visitors increased, the recovery of service exports also played a role in the increase in exports.

The domains of business and architecture similarly mirrored the expansion of the economy. In the fourth quarter of 2023, the business sector saw strong performance and rapid expansion, particularly in key mobility areas like wholesale and retail trades, lodging, food and beverage provision, and transportation and warehousing.

In line with the strengthening of both local and international demand, the processing industry, which is the primary driver of economic growth, also had strong growth.

Source: Bank of Indonesia