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Middle-class spending key to fixing GDP growth: Economic Council
The newly established National Economic Council (DEN) is tasked with providing recommendations to the President on strategic economic issues.
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Former World Bank development policy and partnerships managing director Mari Elka Pangestu speaks on Dec. 7, 2023, at the 12th Annual International Forum on Economic Development and Public Policy (AIFED) in Nusa Dua, Bali. (Finance Ministry/-)
T
he newly established National Economic Council (DEN) has suggested that the government strengthen middle-class spending power to sustain economic growth in the fourth quarter.
Indonesia’s gross domestic product grew just 4.95 percent year-on-year (yoy) in the third quarter, according to Statistics Indonesia (BPS) data released on Tuesday, continuing a slowdown seen since the beginning of this year with economic growth of 5.11 percent in the first and 5.05 percent in the second quarter.
As a result, GDP growth over the first nine months stands at 5.03 percent yoy, casting doubt on the country’s ability to reach the World Bank’s full year forecast of 5.1 percent.
DEN deputy head Mari Elka Pangestu highlighted that household spending, which accounts for the majority of Indonesia’s GDP, grew by only 4.9 percent, the lowest rate in the past 13 years.
In response, the council provided several recommendations for beefing up economic activity during a meeting with President Prabowo Subianto on Tuesday.
“The issue is that food prices remain relatively high, and we are concerned that a [potential] rise in global oil prices could push inflation up. From various numbers, it appears that spending power has weakened. [We need to improve], particularly for the middle class, as lower-income groups already receive direct social aid. We are currently discussing programs to address this,” she said on Tuesday, as quoted by Kompas.
The council also recommended boosting government spending and improving the investment climate, both of which could stimulate economic growth in the short and medium term.
