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Closing the year, is our economy still in good shape?
Amid this subdued global backdrop, Indonesia’s economic performance is regarded among the best in the Group of 20 countries.
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Buildings are pictured during sunset in Jakarta on Dec. 20, 2023. (AFP/Yasuyoshi Chiba)
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t is widely expected that by the end of this year, the global economy will experience a slowdown. Many factors have contributed to this, including the slowing manufacturing sector in industrial production and lower investment. This is a result of synchronous central bank policy tightening across the globe that has led to higher investment costs.
Even China, as one of the biggest economies, anticipates lower-than-expected growth dampened by an ailing property market and slow domestic demand, which in turn has impacted global trade activities. Meanwhile, geopolitical tensions and climate change issues also arose, which risked accelerating commodity prices.
Amid all of these global issues, Indonesia’s economic performance is regarded among the best in the Group of 20 countries. Even though gross domestic product (GDP) growth slightly softened from 5.17 percent in the second quarter of 2023 (2Q23) to 4.94 percent in 3Q23, this was still higher than the average 2 percent growth among the G20 countries. In the January-September period, Indonesia’s economic growth averaged 5.05 percent, outperforming the average 2 percent year-to-date (ytd) growth among G20 countries.
Indonesia still managed to stay resilient during the uneasy global economic environment. This achievement was supported by strong domestic activities such as consumption and investments.
In 3Q23, household consumption was the main driving force, contributing 2.6 percentage points to economic growth. Our Mandiri Spending Index (MSI) also revealed that household activities showed a consistent increase in value during 2023, with the majority of spending coming from recreational activities — spending in restaurants, supermarkets and fashion. Spending in these groups rose and contributed a large proportion to total household spending over the last two years. This is consistent with the component in the GDP that mobility-related household consumption grew the most.
In terms of basic needs, people’s purchasing power has also remained stable as inflation stayed manageable during 2023. As of November 2023, Indonesia’s headline inflation was recorded at 2.2 percent ytd. Again, this number still outperforms the average inflation in G20 countries, which was around 12 percent ytd. In addition, investments in the form of gross fixed capital formation (GFCF) also played a significant role in our economy during the last quarters. This component showed high growth, as it was backed up by investments in buildings as administrations around Indonesia continued to accelerate infrastructure development.
So, with those solid fundamentals, will Indonesia continue to show resilient growth in the last quarter of this year?
