Macro Economic

Indonesia Macro Update - GDP Growth 07 May 2024

Fikri C. Permana 07 May 2024

Tuesday, 7 May 2024

Continuing Robust Economic Growth in 1Q24

Indonesia’s economic growth remained steady in 1Q24 at 5.11% yoy or -0.83% qoq (Cons: -0.86% qoq or 5.08% yoy, KBVS: -1.01% qoq or 4.92% yoy, Prev: 0.45% qoq or 5.04% yoy). This is a notably positive development amidst political instability surrounding the Presidential Election (Pilpres) and Legislative Election (Pileg) on 14 Feb'24 and related disputed, alongside an inflation rate capped at 3.05% yoy at the end of 1Q24. Regarding labor force, Indonesia's unemployment rate (TPT) decreased to 4.82% (Prev: 5.32%), reflecting 7.20 mn unemployed individuals, while 142.18 mn people are categorized as Employed, and 64.88 min others are Not in the Labor Force.

With a promising start in 1Q24, we expect this momentum to sustain economic growth at 5.2% yoy throughout 2024. We anticipate this will be supported by (a) reduced inflation risks and increased purchasing power to boost household expenditure; (b) Regional Elections (Pilkada) and the new government stimulating better government expenditure in 2H24; (c) Expectations for domestic political stability to drive investment; and (d) Improved prices of Indonesian export commodities and increased global demand, particularly from trading partners, amidst global economic recovery and the expected decline in the global cost of funds following anticipated Fed Rate cuts in 2H24. Additionally, the relocation of the national capital to the Capital Region (IKN) is expected to foster spatial economic distribution. However on sector basis,, the contracted growth recorded in 1Q24 by the Agriculture, Forestry, and Fisheries sector (-3.54% yoy); limited growth in the Financial and Insurance Services sector; (3.91% yoy) and Real Estate (2.54% yoy) sectors are concerns that may hinder achieving better economic growth and labor absorption. This is compounded by the ongoing global economic volatility amidst geopolitical uncertainties and concerns of flight to safety in global financial markets.


KBVS Research Team