Indonesia’s Processing Industry Becomes the “Main Actor” of Economic Growth

Indonesia's Processing/manufacturing Industry

Indonesia has been confirmed to be safe from the recession threat this year. The national economy is getting stronger. Thus, Indonesia’s economic growth was recorded at 5.44 percent year-on-year (YoY) in the second quarter of 2022. The main actor behind this growth is the processing industry sector.

Main Expert Staff of the Presidential Staff Office (KSP) Edy Priyono said that Indonesia’s rapid economic growth was mainly driven by the performance of the processing industry which showed an increasing trend. When viewed by sector, he said, the processing industry is the largest component, which is 17.84 percent of Gross Domestic Product (GDP).

“Therefore, the growth of the industrial sector has a very large influence on overall economic growth,” said Edy in an official statement, quoted Monday (15/8/2022).

Of the total economic growth rate of 5.44 percent, the processing industry sector provided the largest contribution at 0.82 percentage points. In addition, he said GDP at constant prices (ADHK) in the processing industry amounted to IDR 587.5 trillion, or grew 4.01 percent on an annual basis.

According to Edy, this figure is also a sign that the processing industry has recovered from the impact of Covid-19. Although the growth of the processing industry was not as big as the transportation and warehousing sector, which grew by 21.27 percent, he considered that the growth of the processing industry was still significant for Indonesia’s economic growth, given the very large proportion of the industrial sector in GDP.

“There are two types of industries that have a big role in boosting the growth of the processing industry, namely textiles and apparel, and food and beverage,” he said.

The textile and apparel industry grew very large, at 13.74 on an annual basis in the second quarter of 2022. Meanwhile, food and beverage grew by 3.68 percent, where this growth was inseparable from the momentum of fasting and Eid al-Fitr.

As previously reported, The Central Statistics Agency (BPS) today also announced that the Indonesian economy grew 3.72% compared to the previous quarter (quarter to quarter/QtQ). For the record, in the first quarter of 2022, the Indonesian economy grew 5.01% (YoY) but contracted 0.95% (QtQ).

With growth reaching 5.44% in the first quarter of 2022, Indonesia’s Gross Domestic Product (GDP) has grown above 5% or to its historical level for three consecutive quarters.

The Indonesian economy contracted for four quarters in 2020-2021, namely from the second quarter of 2020 to the first quarter of 2021. The Indonesian economy had indeed shot to the level of 7.07% in the second quarter of 2021.

However, the growth spurt was more due to the low calculation base in the previous year considering the Covid-19 pandemic devastated the Indonesian economy in the second quarter of 2020.

If looked at BPS data and eliminated the 2020-2021 anomaly year, then this is the first time that the Joko Widodo (Jokowi) government has been able to record growth of up to 5.44%. This growth is close to the fourth quarter of 2013 which is 5.58% where Indonesia is still led by President Susilo Bambang Yudhoyono (SBY).