Indonesia’s Economic Outlook 2024 (Part 1)

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

As we stand on the cusp of 2024, this article aims to provide a comprehensive overview of Indonesia’s economic performance in 2023 and the prospects that lie ahead in 2024.

In general, Indonesia’s economic performance in 2023 showed considerable improvement, although it fell short of being entirely satisfactory. The primary indicator’s growth rate demonstrated an upward trend, growing by 5.03% annually, a slight deceleration compared to the growth rate of 5.31% in 2022. This growth surge was fueled by positive developments both internally and externally. Internally, the public’s confidence continued to rise, manifested in a 4.8% increase in household consumption in 2023.

Similarly, investment grew by approximately 4.0% in 2023, almost on par with the increase in 2022. Externally, Indonesia recorded a growth in the value of goods and services exports of 12.8% in 2023, a slight slowdown from 29.8% in 2022. One factor contributing to this was the increase in the inflation rate from 2.86% in 2022 to 3.88% in 2023. Bank Indonesia responded to this recently by raising the basic interest rate (BI7DRR).

At the same time, the rupiah exchange rate weakened to nearly Rp16,000 per USD, with increasing volatility. Significant improvements in fundamental issues, such as providing basic infrastructure and worker skills, have not yet accompanied this economic growth performance. The number of poor people in 2023 is still relatively high, at 25.9 million people or 9.4% of Indonesia’s 270 million population classified as poor. Likewise, the national unemployed remains at 7.9 million, or about 5.3% of the total workforce. This condition indicates that income growth has not been evenly distributed.