Election Year Economics: Understanding Indonesia’s Development Challenges in 2024 (Part-1)

By: Dr. Mohamad Ikhsan Modjo (Financial Economic Specialist’s BINUS International Finance Program)

As we enter the political year 2024, Indonesia still faces significant challenges across various development sectors. In the economic sector, for instance, the issue is how to stimulate economic growth higher than the current range of 5% to prevent the country from falling into the middle-income trap and to secure alternative development funding sources.

Indonesia’s economy is projected to grow only by 5.1% throughout 2023 due to pressures from global inflation and the stagnation of aggregate fixed capital formation below 8%. This investment pressure is expected to continue into 2024. Hence, the GDP growth in 2024 is predicted not to exceed a maximum of 5.5%.

One factor that aided growth in 2023 is the improvement in household consumption, which also drives growth. The business climate is also improving, along with enhancing logistics and implementing a single integrated archiving system by the government through economic stimulus during the pandemic years. Meanwhile, the investment recovery of government infrastructure spending will support Indonesian economic growth. Besides infrastructure, the plan is to utilize direct funds for the community and labor-intensive development programs, so the political event of the 2024 election will also support the purchasing power of rural communities in 2024.