Indonesia’s Economic Outlook 2024 (Part 3)

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 other words, the existing growth is still far from high quality and can be felt by all layers of society. Similarly, improvements in the internal and external economy in 2023 are still limited to the demand side in the form of improvements in consumption, investment, and the exchange rate of goods and services exports. Meanwhile, improvements on the supply side are not yet prominent. The increase in consumption is still limited to being met by increased capacity utilization, not an increase in production capacity itself.

The increase in export value is still more due to improved commodity prices in the international market rather than growth in the number (volume) of export commodities. Therefore, improvements in distribution and production must be a priority in 2024. This improvement can be done by improving access to jobs by eradicating rigidity in the labor market. In addition, the acceleration of providing various infrastructures such as roads, bridges, and markets and guaranteeing the availability of energy supplies must be carried out.

In addition to the internal challenges above, the Indonesian economy will face external challenges caused by rising world oil prices. The increase in oil prices will have interrelated impacts that potentially slow down national economic growth in 2024. These impacts include the fiscal side, household consumption, and the industrial sector. From the fiscal side, an increase in oil prices above the assumption of USD80 per barrel will increase the 2024 state budget deficit, depending on the price increase.