Indonesia’s target of 8% economic growth is projected to be achievable only by 2029, coinciding with the end of President Prabowo Subianto’s term. The Ministry of Trade estimates that exports will need to reach USD 405.7 billion by that year, a 57% increase from the USD 258.8 billion recorded in 2023.   

 

Fajarini Puntodewi, Head of Trade Policy at the Ministry of Trade, expects economic growth in 2024 to hit 5.79%. Growth is forecast to reach 6% by 2027 and surpass 7% in 2028, with an average annual growth of 6.16% between 2025 and 2028. 

 

“Economic growth needs to hit 8%. To achieve this, export growth must rise by 7.1% in 2025 and climb to 9.6% by 2029,” Puntodewi said during a press briefing in Jakarta on Tuesday, as quoted by Katadata.  

 

From January to October 2024, exports grew by 1.3% year-on-year to USD 217.2 billion. Puntodewi emphasized that exports must reach USD 294.5 billion in 2025 to sustain a growth rate of 5.06%. She warned that achieving the 8% growth target will require aggressive export growth, reaching USD 405.7 billion by 2029. “We must push export growth with all our might,” she added.   

 

Mohammad Faisal, Executive Director of the Center of Reform on Economics (CORE) Indonesia, said Puntodewi's projections align with discussions on the National Medium-Term Development Plan (RPJMN) at the National Development Planning Agency (Bappenas). However, Faisal proposed an alternative scenario where 8% economic growth could be achieved by 2028.   

 

According to Faisal, hitting this target will depend heavily on the government’s priority programs in the coming year. He stressed that innovation in 2025 will be crucial to meeting the target by 2028 or 2029.   

 

"Based on current government policy directions for 2025, even achieving 5% economic growth will be difficult without significant changes," Faisal noted.   

 

Faisal also highlighted that national economic growth still relies heavily on household consumption, which accounts for 56% of GDP. Therefore, improving the purchasing power of the middle class will be critical next year.   

 

He calculated that the middle class dominates household consumption at 84%, meaning their contribution to the national economy is roughly 47%.   

 

"Frankly, I don’t see concrete steps yet that would make the 8% growth target achievable, as the key lies in reversing the current decline in middle-class purchasing power," he added.   

 

Coordinating Minister for Economic Affairs Airlangga Hartarto previously noted that Indonesia’s middle class has shrunk to 17.13%, or approximately 46.25 million people. Airlangga highlighted that the middle class is the primary driver of the country's economic growth.   

 

Data from the National Socio-Economic Survey (Susenas) by Statistics Indonesia (BPS) shows that Indonesia’s middle class peaked at 23% in 2018. In 2019, the middle class comprised 57.33 million people, or 21.45% of the total population.   

 

The middle-class population has steadily declined since then. BPS defines the middle class as households with expenditures between 3.5 and 17 times the national poverty line.   


Original article here

This article is published in partnership with Katadata