Indonesia's Economy Grows 5.03% in 2024, Kadin Calls for Focus on Investment and Domestic Consumption to Reach 8% Target by 2029

JAKARTA, investortrust.id - With the government aiming for an ambitious 8% economic growth rate by 2029, and 5.3% this year, Indonesia is building upon a solid foundation of 5.03% expansion in 2024, while the nation's peak business group calls for greater focus on investment and domestic purchasing power.

Indonesia's economy expanded by 5.03% in 2024, fueled by strong household consumption, robust investment, and strategic government spending, according to data released by the Central Statistics Agency (BPS) on Wednesday, Feb 5, 2025.

In the fourth quarter of 2024, the economy grew 5.02%. However, the agency noted that economic growth in 2024 was slightly slower compared to the previous year, primarily due to a decline in net exports.

Acting Head of the Central Statistics Agency, Amalia Adininggar Widyasanti, explained that while net exports remained positive, their contribution to economic growth was lower in 2024, resulting in a negative contribution of 0.01% to the overall growth figure.

This compares to a positive contribution of 0.66% from net exports in 2023. BPS data showed that total net exports at constant prices amounted to Rp 513.7 trillion ($32 billion) in 2024, down slightly from Rp 514.36 trillion in 2023.

Household consumption remained a key driver of growth, expanding by 4.94% and contributing 54.04% to the overall economic expansion. This resilience in consumer spending was attributed to controlled inflation and increased public mobility, as reflected in higher hotel occupancy rates and passenger numbers across various modes of transportation.

Kadin's Perspective on Future Growth

Amidst the 5.03% economic growth, Chairman of the Indonesian Chamber of Commerce and Industry (Kadin) Anindya Novyan Bakrie emphasized the need for a strategic focus on boosting investment and strengthening domestic purchasing power to achieve higher growth rates. He highlighted that approximately 60% of Indonesia's economic growth is driven by domestic consumption, largely from the upper-middle class. Therefore, maintaining the purchasing power of this group is crucial for sustaining economic momentum.

"We must ensure that domestic consumption remains stable, especially from the upper-middle class, which contributes around 70% of total domestic consumption," Anin said at the Kadin Indonesia Tower, Jakarta, Wednesday, Feb 5, 2025. "This is important to maintain the growth momentum."

While acknowledging the significant role of domestic consumption, Anin stressed that increasing export-oriented investments with added value must be a primary focus for sustainable economic growth. "If we want to increase from 5% to 6%, 7%, or even 8%, we must increase investment in sectors that can boost exports with added value," he explained. The government targets 5.3% growth this year, and an ambitious 8% by 2029.

Minister of Finance Sri Mulyani Indrawati highlighted the crucial role of the State Budget (APBN) in maintaining household purchasing power.

"Thanks to hard work, solid synergy, and the strategic role of the state budget as an instrument in safeguarding the Indonesian economy, we were able to maintain stability and growth until the end of 2024," she said in an official statement on Wednesday, Feb 5, 2025. She emphasized that the state budget was optimized to support purchasing power through social protection programs and the implementation of national development agendas.

The government's efforts to maintain purchasing power included social assistance programs for low-income groups, measures to ensure stable food supplies and prices, and initiatives to stimulate job creation, which resulted in 4.79 million new jobs in 2024.

Consumption by Non-Profit Institutions Serving Households (LNPRT) also saw significant growth of 12.48% throughout 2024, driven by activities related to general elections, simultaneous regional elections, and sporting events.

Investment and Sectoral Performance

Gross Fixed Capital Formation (PMTB), or investment, grew by 4.61%, contributing 29.15% to overall growth. This continued a trend of strengthening investment performance over the past four years. Economic and political stability, along with supportive fiscal and monetary policies, boosted investor confidence and led to increased investment realization across various sectors, including downstream industries.

Foreign and domestic direct investment grew by 20.82%, reaching a total value of Rp 1,714 trillion (about $108 billion), exceeding the government's target. Household consumption and investment combined contributed 83.19% to the accumulated growth.

Other components contributing to economic growth included government consumption, which grew by 0.48% in 2024.

The manufacturing sector grew by 4.43% in 2024, driven by strong domestic and global demand. The base metal, electronics, and food and beverage subsectors were key contributors to this growth.

In line with the manufacturing sector, the trade sector grew by 4.86% in 2024, supported by increased production activity. The transportation sector experienced significant growth of 8.69% due to the hosting of national and international events and improvements in tourism infrastructure. This also boosted the accommodation and food and beverage sector, which grew by 6.61%.

Primary sectors, such as mining, experienced a slowdown due to commodity price moderation, growing by 4.9% throughout the year. The agricultural sector as a whole grew by 0.67%, despite declines in rice and palm oil production. However, the agricultural sector's performance is expected to improve with the implementation of food self-sufficiency policies and the free nutritious meals program (MBG).

BPS recorded Indonesia's Gross Domestic Product (GDP) at current prices at Rp 22,148.96 trillion (about $1.4 trillion) in 2024 and Rp 12,920.28 trillion at constant prices. In 2023, the cumulative GDP at current prices was Rp 20,892.35 trillion and Rp 12,301.48 trillion at constant prices.

"2024 was a year full of challenges and dynamics, both globally and domestically," Minister Mulyani said.