Indonesia’s Economy Grows Below 5%, Minister of Finance Reveals the Reasons

Indonesian Traditional Market

The latest data of Indonesia’s economy in the third quarter of 2023 has been released by the Central Statistics Agency (BPS). Surprisingly, the year-on-year economic growth rate for Q3 stood at 4.94%, which is below the government’s target of achieving over 5% GDP growth in this specific quarter. This underwhelming performance has raised questions about the underlying causes of this economic slowdown, and the Minister of Finance offers some crucial insights.

Finance Minister Sri Mulyani Indrawati attributes this lower-than-expected growth rate to subdued household consumption. She points out that the consumption figures reported by BPS were noticeably lower than what the government had anticipated.

Interestingly, Sri Mulyani highlights that consumer confidence remained robust throughout the third quarter, which makes the consumption figures even more puzzling. She shared her observations during a press conference at the Office of the Coordinating Ministry for Economic Affairs in Central Jakarta on Tuesday, October 7, 2023.

Sri Mulyani’s analysis doesn’t stop there. She also addresses the issue of negative government consumption. She explains that government spending patterns typically materialize during the fourth quarter, shedding light on the specific nature of government budget execution. This crucial information provides a more comprehensive understanding of the economic landscape.

However, it’s important to note that the Indonesian government has responded proactively to the sluggish economic performance. They have introduced a comprehensive package of policies aimed at boosting various sectors.

These measures range from providing assistance for the El Nino event to offering affordable housing options for low-income households. Additionally, they have rolled out government-covered Value Added Tax (PPN) to stimulate consumption.

With these policy initiatives in place, Sri Mulyani is optimistic about the economic outlook for the fourth quarter. In fact, she believes that the policies implemented during the third quarter have the potential to contribute an additional 0.2% of economic growth. This boost would help maintain the economic growth rate at 5.01% in the fourth quarter, ensuring that the full-year economic performance for 2023 reaches a stable 5.04%.

In summary, the Minister of Finance’s insights provide a comprehensive understanding of the challenges and measures taken to address the slowdown growth in Indonesia’s economy. The government’s proactive approach underscores the commitment to maintaining a resilient and sustainable economic landscape in the face of evolving global economic dynamics.