Institute for Research on Economics and Society – Faculty of Economics and Business – University of Indonesia

The Illusion of Stable Growth: Indonesia Economic Outlook Q2-2024

Tuesday May 7th, 2024

Indonesia's economic growth rebounded to 5.04% (yoy) in the fourth quarter of 2023, following a slowdown to 4.94% (yoy) in the previous quarter. This rebound brought the overall growth for 2023 to 5.05% (yoy), surpassing the 5% threshold. However, there are concerning signs, as the three largest sectors, agriculture, manufacturing, and trade, which cumulatively accounted for over 40% of the economy, showed signs of deceleration in the fourth quarter of 2023. Smaller sectors like transportation, mining, and electricity grew substantially, offsetting some of the decline from the major sectors. External factors, such as geopolitical tensions, China's economic slowdown, and El Niño's impact on agricultural productivity played a role in the challenges faced by Indonesia's economy. Additionally, domestic issues like structural productivity declines in agriculture, weakening purchasing power in the wholesale and retail trade sector, and the continued sluggishness of manufacturing raised concerns. Despite these challenges, the rebound indicates resilience, but it also serves as a call to action for Indonesia to accelerate structural transformation and improve overall productivity.

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