Gross domestic product (GDP) grew by 4.95 percent year-on-year (yoy) in the third quarter of this year, well below the target of 5 to 5.1 percent for the whole year. It was the second time the country grew below its usual 5 percent mark in the post-pandemic period. The last time was in the third quarter of last year, at 4.94 percent.

Months ago, indicators such as consistently slowing inflation for several consecutive months and a shrinking middle class as a share of the total population sent a warning about the potential slowdown in consumer spending. This is not to mention that the third quarter did not benefit from the economic boosts occasioned by Idul Fitri festivities and the general election in the previous two quarters.

Reflecting on these new developments, maintaining 5 percent growth this year will be challenging. The country should anticipate a repeat of last year’s performance, when the economy grew 5.05 percent, or even worse than that.

Moreover, with the new cabinet still getting its footing, it is unlikely that the administration of President Prabowo Subianto will quickly run and prop up the economy in the last quarter.

Should the economy grow at an even lower rate this year, the consequences would extend beyond this year and might jeopardize President Prabowo’s dream of 8 percent economic growth over the next five years, unless his government is prepared to be stretched to the limit to realize the target.

Nevertheless, the government can start by rethinking how to improve the spending power of Indonesians amid policies that will instead discourage spending, such as the value-added tax (VAT), which will increase to 12 percent starting next year, and income-cutting mechanisms to support government programs, such as the public housing savings (Tapera) program, which is to come into effect in 2027.

An Indonesia Employers Association (Apindo) survey conducted in January of this year found that almost 45 percent of companies had no plans to expand their business over the next five years. Businesses cited a lack of financing access and government policy flip-flops, among others reasons for the restraint.

The unemployment figure may have declined somewhat over the past decade to 4.91 percent this August from the previous 5 to 6 percent. Statistics Indonesia (BPS) has noted that many people have been absorbed by the informal sector, which tends to imply low productivity.

Pushing agriculture to boost growth could be an interesting choice, but the sector will only be able to flourish if smallholders can be well organized and corporatized to empower themselves. A top-down approach, such as the food estate program, is unlikely to do much to lift up the well-being of those working tirelessly in the sector.

Above all, the country will never fully unleash its economic potential unless the new government is serious about cracking down on corruption, which is apparently as rampant today as under the New Order. Indonesia’s Corruption Perception Index has worsened in the last few years, partly because the government has undermined its own fight against graft, while the new administration has yet to offer a breakthrough to make a difference.