[JAKARTA] Indonesia’s economy expanded by 5.05 per cent in 2023, a shade above the government’s projections but lower than the 5.3 per cent growth in 2022.

The final figure for last year was, however, still within Bank Indonesia’s range of 4.5 per cent to 5.3 per cent.

The government’s statistics agency said on Monday (Feb 5) that gross domestic product slowed last year due to weaker exports driven by lower commodity prices.

Growth for the fourth quarter of 2023 was 5.04 per cent, a shade higher than the 5.01 per cent expansion over the same period in 2022.

Amalia Adininggar Widyasanti ,the acting head of Statistics Indonesia, told reporters that domestic consumption was the key driver for South-east Asia’s larges teconomy, which helped to offset lagging exports.

“The main contributor to GDP growth included household consumption, which grew 4.82 per cent,” she said.

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Household consumption which accounts for more than half of total GDP. Despite the year-end holiday momentum, household consumption on a quarterly basis grew by 2.5 per cent, slightly lower than the previous quarter’s 2.6 per cent.

Exports were up by 1.32 per cent year-on-year, while imports declined 1.65 per cent, the data showed.

Indonesia recently reported a fall in its 2023 trade surplus as exports and imports dropped amid falling commodity prices and slowing demand from its trading partner.

Meanwhile, investments in Indonesia – the second-largest contributor to growth – was up 5.02 per cent in the fourth quarter, from 5.77 per cent in the previous three-month period.

Foreign direct investment (FDI) in 2023 rose 13.7 per cent year-on-year to 744 trillion rupiah (S$63.5 billion). The country has seen strong FDI growth after the Covid-19 pandemic, particularly as investments in the nickel processing industry continues to be strong due to greater interest in electric vehicles.

Slower growth

Economists warned of a continued slowdown in growth in the coming quarters as the central bank is likely to tighten monetary policy and commodity demand continues to weaken.

“Our forecast that growth in advanced economies will struggle and that commodity prices will remain subdued suggests that exports will stay weak,” said Ankita Amajuri at Capital Economics. “We think the economy is set to struggle over the coming quarters.”

Indonesia’s outgoing president Joko Widodo has pushed to speed up the disbursement of cash aid and raised the salaries of civil servants to help boost consumption. This, he said, would help push GDP growth to 5.2 per cent in 2024.

OCBC’s senior Asean economist Lavanya Venkateswaran expects Indonesia’s GDP growth to be weaker on account of the lagged impact of monetary policy tightening, fading commodity tailwinds, and more cautious investment spending ahead of the Feb 14 presidential election.

“OCBC has revised our 2024 GDP growth forecast to 4.8 per cent, from 5.1 per cent previously,” she said.

DBS Group Research managing director chief economist Taimur Baig said investments are likely to remain a key counterweight for Indonesia’s growth, even as export-oriented sectors, particularly commodities, face a cloudier outlook.

Weaker demand from China, Indonesia’s biggest trading partner, is also expected to add more pressure on the Indonesia’s exports.

Moody’s Analytics, which has forecast growth of 4.9 per cent in 204 said in a recent note that nonthly exports and imports fell in year-on-year terms throughout the last quarter, the former being hit by weaker demand from China and other major export partners.