Indonesia’s GDP growth reaches nine-year high
Indonesia’s economy grew last year at the fastest pace since 2013, marking the highest economic
output since President Joko “Jokowi” Widodo took office.
The country’s gross domestic product (GDP) rose by 5.31 percent in 2022, handily beating the
preceding year’s 3.71 percent but failing to match the 2013 figure of 5.56 percent, Statistics
Indonesia (BPS) reported on Monday.
Economic output in the fourth quarter of last year increased by 5.01 percent from the equivalent
period of 2021, much lower than the year-on-year (yoy) increase of 5.72 percent seen in the third
The statistics agency attributed the slowdown to weaker purchasing power as a result of increased i
inflation in last year’s final quarter.
“Indonesia experienced solid economic growth in 2022,” BPS head Margo Yuwono told reporters
in a press conference called to publish the latest GDP report.
The World Bank and the International Monetary Fund had expected Indonesia’s 2022 GDP growth
to come in at 5.2 and 5.3 percent, respectively, while the Asian Development Bank had a bullish
forecast of 5.4 percent.
Household spending, long the backbone of the domestic economy, remains the main source of
growth, contributing 2.61 percentage points (ppt) to the overall GDP growth rate.
Looser COVID-19 pandemic restrictions paved the way for more people to enjoy transportation
and leisure services last year, as reflected in a 4.93 percent annual rise in spending in this
category, nearing the pre-pandemic level of 5.04 percent.
Bank Indonesia (BI) has been raising its key interest rate since August last year to contain
inflationary pressure stemming from the depreciation of the rupiah against the United States dollar
and from a government-mandated hike in subsidized fuel prices in September.
As of January, the central bank had raised its benchmark seven-day reverse repo rate by a total of
225 basis points.
But even in the face of repeated hikes, the manufacturing purchasing managers index (PMI)
remained in expansionary territory above the threshold of 50 points throughout last year, and retail
sales grew 5.94 percent.
At BI’s latest monthly monetary policy meeting, held last month, Governor Perry Warjiyo described
the current interest rates as “adequate” to achieve this year’s inflation targets, which economists
interpreted as a signal from the central bank that the hiking cycle is over.
Asked to comment on the latest GDP data, Bank Mandiri chief economist Andry Asmoro told The
Jakarta Post on Monday that the data added to “positive sentiment for [the] Indonesian market.”
Gross fixed capital formation (GFCF), or investment, was the second-biggest contributor to GDP
growth last year, accounting for 1.24 ppt.
Incentives by the government to boost capital injections, regulatory reforms and massive
infrastructure programs have encouraged some firms to increase their expenditure on machinery
and vehicles, which grew 3.87 percent yoy.
At that rate, however, GFCF growth is a far cry from the pre-pandemic level, with Margo noting
that it had increased by 4.45 percent in 2019.
Realized investment, excluding micro, small and medium enterprises (MSMEs), the financial
sector as well as the oil and gas sector, rose 34 percent to Rp 1.207 quadrillion (US$79.6 billion)
last year, exceeding a target set by President Jokowi, according to Investment Ministry data.
As the government resumed work on its national strategic projects, GFCF was expected to lean
more on construction investment this year, Bank Mandiri economist Faisal Rachman told the Post.
“This is backed up by the higher budget [allocation] for infrastructure in the 2023 state budget,”
Net exports of goods and services contributed 0.81 ppt to the overall growth figure for 2022.
Growing 16.28 percent in the course of last year, exports outpaced imports, which rose 14.75
Exports were driven by strong growth in the shipment of coal, metals and vehicles.
Indonesia reached its highest-ever trade surplus last year at $54.46 billion as the war in Ukraine
and sanctions imposed on Russia pushed up global prices of many commodities, benefitting
major commodity exporters like Indonesia.
Although the exports windfall might persist in the coming months, its effect is expected to fade as
crude palm oil (CPO) prices in global markets have dwindled.
CPO prices in December were down 25 percent from a year earlier, according to World Bank data.
CPO accounted for around 12 percent of the $291.98 billion worth of Indonesian exports last year.
“The trade surplus will narrow on the back of rising import prices and lower commodity prices,”
Irman Faiz, an economist with publicly listed private lender Bank Danamon, told the Post on
President Jokowi said on Monday that Indonesia had returned to the upper-middle income status,
where it had briefly stood before the coronavirus pandemic struck the country’s emerging
“I hope we can make a great leap forward,” Jokowi said.
Source: The Jakarta Post