Indonesia’s economy grew 5.31% in 2022 from a year earlier, government data showed on Monday, highlighting that Southeast Asia’s largest economy has now returned to a pre-pandemic economic growth path as the government eased COVID restrictions and businesses got back into gear.
The growth rate of last year’s gross domestic product was the highest in the past nine years and accelerated from a 3.69% expansion in 2021. Indonesian President Joko “Jokowi” Widodo had previously forecast growth of 5.2% to 5.3% for 2022.
Annual household consumption, which makes up over half of Indonesia’s GDP, grew 4.93% year-on-year, up from 2.02% in 2021. After confirming that daily COVID-19 cases had dropped, the government removed restrictions last year, driving up household consumption.
“The source of growth from the expenditure side is household consumption,” Margo Yuwono, head of Statistics Indonesia, told reporters at a news conference on Monday. He added, “The improvement in income boosted consumption in the transport, communication, and restaurant-hotel sectors.”
The resource rich country, a major supplier of thermal coal, palm oil and nickel, also enjoyed rising commodity prices amid Ukraine war. Exports saw the highest growth at 16.28% among the expenditure segment. Yuwono said that surging foreign tourist arrivals were also driving growth in services exports. The highest growth on the production side was the transportation and storage industry at 19.87%.
The country’s fourth-quarter GDP, also released on Monday, shows a year-on-year growth rate of 5.01%, slowing from 5.72% in the third quarter. This is higher than the median forecast of 4.84% year-on-year by 21 economists polled by Reuters.
Bank Indonesia, the country’s central bank, had forecast growth of 4.5% to 5.3% for 2023. The International Monetary Fund in its World Economic Outlook update in January also projected that Indonesia’s economy will grow 4.8% in 2023.
Some economists also expect a bleaker outlook amid a global slowdown and inflationary pressure.
“Consumption will grow slower as interest rate hikes could affect consumer behavior. Investment is also expected to grow moderately slower, particularly non-building investments [those outside of the construction industry], due to the high base a year earlier, coupled with a global economic slowdown,” Josua Pardede, an economist at Bank Permata told Nikkei Asia before the Monday’s announcement.
He also noted that foreign direct investments are likely to slow down in the quarter ahead of the presidential election set for February 2024. – NIKKEI ASIA