Indonesia's Economic Growth Slows Slightly in 2024, Stabilizing for 2025

INDONESIAUPDATES.COM, News En – Indonesia’s economy grew by 5.03 percent in 2024, slightly missing the government’s target of 5.2 percent and trailing last year’s growth of 5.05 percent, according to the latest data from the Central Statistics Agency (BPS). The country’s GDP growth for the fourth quarter was recorded at 5.02 percent year-on-year, just shy of the 5.04 percent growth seen in the previous quarter.

Amalia Adininggar Widyasanti, Acting Head of BPS, highlighted that all sectors showed positive growth, with manufacturing (18.98 percent), trade (13.07 percent), and agriculture (12.61 percent) leading the charge. The services sector experienced the highest growth rate, expanding by 9.8 percent, driven by a surge in tourism, increased mobility, and recreational activities. Additionally, transportation and warehousing saw an 8.69 percent increase, while accommodation and food services grew by 8.56 percent.

Despite these positive figures, economists are forecasting a more moderate growth for 2025, with estimates hovering around 5 percent. Bank Danamon’s economist Hosianna Evalita Situmorang projects that household consumption will continue to fuel growth, but rising costs could pose challenges. “Recovering purchasing power will support consumption, though rising costs remain a concern,” Situmorang said.

On the other hand, Bank Permata’s economist Josua Pardede noted that the slower growth in household consumption, which increased by only 4.85 percent in Q4, points to weaker purchasing power. Indicators such as retail sales, automotive sales, and money supply have shown signs of deceleration, with car sales growth dropping significantly from 14.82 percent in Q3 to just 3.77 percent in Q4.

“The slowdown reflects weaker purchasing power and reduced mobility,” Pardede explained. He added that global economic challenges, coupled with subdued private investment, are likely to continue affecting Indonesia’s economic outlook in 2025.

Bank Indonesia Governor Perry Warjiyo also projected that Indonesia’s GDP growth for 2024 would fall near the lower end of the 4.7 percent to 5.5 percent range. He attributed this to weaker domestic demand and exports, cautioning that global uncertainties and soft private sector investment could result in moderate growth for the year ahead.

While global headwinds and geopolitical uncertainties are expected to put pressure on Indonesia’s economy, the World Bank’s Indonesia Economic Prospects report, released in October 2024, still forecasted an average GDP growth of 5.1 percent annually from 2024 to 2026. This forecast accounts for challenges such as declining commodity prices, rising food and energy price volatility, and geopolitical tensions, but also factors in the resilience of domestic consumption and investment.

As Indonesia navigates through these economic headwinds, the focus will remain on sustaining growth through household consumption, while addressing the challenges of rising costs and external market fluctuations. The coming year promises to be a balancing act for policymakers as they steer the economy through a mix of global uncertainties and domestic dynamics.

Frequently Asked Questions (FAQ)

What was Indonesia’s GDP growth in 2024? Indonesia’s GDP grew by 5.03 percent in 2024, slightly below the government’s target of 5.2 percent and just under last year’s growth of 5.05 percent.
Which sectors contributed most to Indonesia’s economic growth in 2024? Key contributors included manufacturing (18.98 percent), trade (13.07 percent), and agriculture (12.61 percent). The services sector also saw the fastest growth at 9.8 percent, with transportation, warehousing, and accommodation services driving much of the increase.
What factors contributed to slower GDP growth in 2024? Slower household consumption, weaker purchasing power, and decelerating retail and automotive sales were key factors in the slowdown. Additionally, global uncertainties and muted private investment also played a role in moderating growth.
What is the economic growth forecast for Indonesia in 2025? Economists predict a stable but slightly slower growth rate of around 5 percent in 2025. Household consumption will remain a key driver, though rising costs and weaker purchasing power could present challenges.
How does household consumption affect Indonesia’s economy? Household consumption is a major contributor to Indonesia’s economic growth. However, slower growth in consumption, especially in the fourth quarter of 2024, reflects weaker purchasing power and reduced mobility, which could slow economic growth moving forward.
What challenges could Indonesia face in 2025? Challenges include rising costs, global economic headwinds, weaker export demand from key trading partners (except the US), and subdued private sector investment. These factors could hinder stronger economic performance in 2025.
What is the World Bank’s outlook for Indonesia’s economy? The World Bank projects Indonesia’s GDP growth to average 5.1 percent annually from 2024 to 2026, despite challenges like fluctuating commodity prices, food and energy price volatility, and geopolitical uncertainties.
How might global factors impact Indonesia’s economy in 2025? Global headwinds such as geopolitical instability, trade disruptions, and declining commodity prices could weigh on Indonesia’s economy in 2025. These factors, combined with a slowdown in private sector investment, may keep growth moderate.
What are some indicators of Indonesia’s economic slowdown? Key indicators include decelerating retail sales, a significant drop in automotive sales growth, and a slower rate of money supply expansion, which reflect softer consumer spending, especially among middle- and lower-income groups.
How will Indonesia’s economy adapt to these challenges? The government and policymakers will likely focus on sustaining domestic consumption, managing inflation, and fostering investment to navigate external challenges and ensure moderate yet stable growth moving forward.