As 2024 comes to a close, the world is keen to assess Indonesia’s economic performance. As one of the fastest-growing economies globally, Indonesia’s trajectory has always been a point of interest. However, 2024 was a significant year—not only for economic indicators but also due to the transition from President Joko Widodo to Prabowo Subianto, marking the end of an era in Indonesian politics. So, how did Indonesia fare economically in 2024? Let’s break it down using key economic indicators.
Economic Output: Indonesia’s GDP Performance
Gross Domestic Product (GDP) is the primary measure of a country’s economic performance, reflecting the total value of goods and services produced. Despite global uncertainties, Indonesia’s GDP growth remained stable in 2024. Data from Statistics Indonesia indicates that Indonesia’s annual GDP growth stood at 5.03%, a rate consistent with past trends outside of the pandemic years (2020-2022).
But how does this 5% growth compare regionally? Indonesia’s GDP growth was higher than Thailand and Singapore but slightly behind the Philippines and Vietnam. Overall, Indonesia’s economy in 2024 performed steadily without extreme fluctuations—neither experiencing a boom nor a downturn.
Inflation: Declining Price Pressures
Inflation is another crucial economic indicator. In 2024, inflation in Indonesia declined significantly, extending into early 2025. By December 2024, the inflation rate had fallen to 1.57%, one of the lowest in recent years. Several factors contributed to this decline, including government policies such as electricity tariff discounts and reduced airfares, which helped control consumer prices.
One notable development was the food, beverage, and tobacco sector, where inflation was lower than expected, even turning negative at times. This stability in essential goods prices helped maintain consumer purchasing power, particularly for low and middle-income households, easing the burden of living costs.
Consumer Spending: A Record-High Year
Consumer spending plays a vital role in economic growth, reflecting confidence and purchasing power. Throughout 2024, consumer spending in Indonesia increased, reaching its highest level on record. A significant surge was observed between Q4 2023 and Q2 2024, largely attributed to election-related expenditures, wage increases for civil servants, and government incentives aimed at boosting spending.
Employment: Job Market Strength
Employment trends provide insights into economic stability. Indonesia’s unemployment rate continued to decline in 2024, with the first quarter showing an improvement compared to previous years. The pre-election period saw strong employment gains, indicating a positive impact of government spending on job creation. Stable job growth reflects a resilient economy capable of generating employment opportunities.
Sectoral Performance: Agriculture, Manufacturing, and Services
Indonesia’s economic growth is driven by various sectors, with differing performance levels:
- Agriculture: Despite being a crucial sector, agriculture, forestry, and fishing contracted by 3.5% in Q1 2024, highlighting a shift towards industrial and service-based economic activities.
- Manufacturing: Grew modestly, aligning with the overall GDP growth but slightly below the national average of 5%.
- Mining and Quarrying: Recorded an annual growth rate of 4.9%, with notable spikes in early 2024.
- Services: The standout performer of 2024. Business activities grew by 8.38%, while the information and communication industry expanded by 7.57%. The accommodation and food services sector saw an 8.5% rise, reflecting robust growth in consumer-driven industries.
Government Policies: Monetary and Fiscal Measures
Monetary Policy: High Interest Rates
Indonesia’s central bank, Bank Indonesia (BI), maintained high interest rates throughout 2024, keeping them above 6.25% before lowering them slightly to 6% toward the end of the year. While high interest rates help control inflation, they also make borrowing more expensive, potentially slowing down investments and consumer spending. However, Indonesia’s economy remained resilient despite these high rates.
Heading into 2025, Bank Indonesia is signaling a shift toward lowering interest rates to support the rupiah amid global financial uncertainties. This move reflects a transition from a purely “pro-stability” stance to a more balanced approach that fosters growth while mitigating currency risks.
Fiscal Policy: Government Spending and Priorities
Indonesia’s fiscal policy in 2024 largely continued previous trends, with some notable shifts:
- Education and Social Protection: Increased spending.
- Infrastructure: Experienced a decline in funding compared to 2023.
- New Capital City Project: Received 40.6 trillion rupiah in funding, nearly one-third of the budget allocated for food security.
While infrastructure spending dipped, the government’s focus on social welfare and strategic projects remained strong, shaping economic stability and development priorities.
Conclusion: A Year of Steady Growth
So, was 2024 a year of economic growth for Indonesia? Absolutely. The country maintained steady economic expansion, with GDP growth at 5.03%, inflation declining, record-high consumer spending, and improved employment rates. While challenges like high interest rates and sectoral disparities existed, Indonesia’s resilience stood out.
With potential monetary easing in 2025 and ongoing structural transformations, Indonesia’s economic future remains promising. How the new government navigates these shifts will be crucial for sustaining growth in the years ahead.