In the midst of a slowdown in the global economy which was also marked by a declining trend in the price of the main export commodities, the Indonesian economy in the second quarter of 2023 was still able to record positive growth of 5.17 percent year-on-year (YoY), 3.86percent quarter-on-quarter and accumulate growth in the first-half of 2023 at 5.11 percent.
This achievement also marked Indonesia’s economic growth which has been above five percent for seven consecutive quarters. In addition, Indonesia has also returned to being an upper middle-income country, based on the World Bank classification which was updated in July 2023.
“Data from several countries that have reported economic growth in the second quarter of 2023, only China, Uzbekistan and Indonesia are still able to grow above 5 percent, and Indonesia’s economic growth was ahead of Vietnam, the United States, Singapore, and even Germany, which is still experiencing contraction,” said the Coordinator Minister for the Economy Airlangga Hartarto, at a Press Conference on Indonesia’s Economic Growth in the Second Quarter of 2023 at the Office of the Coordinator Ministry for Economic Affairs, Jakarta, on 7 August.
According to the Coordinator Minister, the positive growth of the national economy in the second quarter of 2023 answered concerns that there would be an economic slowdown which was mainly caused by a decrease in the prices of Indonesia’s leading export commodities such as Crude Palm Oil (CPO) and mining as well as due to a slowdown in manufacturing from Indonesia’s main trading partner countries such as the United States and China.
The achievement of economic growth in the second quarter of 2023 was supported by positive growth in almost all expenditure components and business fields. From the expenditure side, household consumption grew strongly, namely 5.23 percent YoY in line with increased community activity during the holidays. Gross Fixed Capital Formation (PMTB), which reflects investment activity and the realization of government infrastructure development, increased to 4.63 percent YoY, and government consumption increased to 10.62 percent YoY.
Meanwhile, in terms of business fields, all sectors grew positively and were marked by the transportation and warehousing sector which grew expansively reaching 15.28 percent YoY, in line with increased mobility of the people. The manufacturing or processing industry, which is still the largest contributor to growth supported by strong domestic demand, also grew faster than the same period last year with a share of GDP reaching 18.25 percent YoY.
In the second quarter of 2023, the economy spatially across the island also grew positively. This growth was dominated by Java Island with a contribution to GDP of 57.27 percent, while all regions outside Java Island also grew supported by increased investment and industrial development. “In the third quarter, we will still be able to boost economic growth, especially through government spending, in particular for large ministries/institutions in the infrastructure, labor-intensive and agriculture sectors,” said the Coordinator Minister Hartarto.
Indonesia’s economic competitiveness has also recorded a sharp increase as shown by a report from the Institute for Management Development (IMD), in which Indonesia is the country with the highest increase in competitiveness ranking in the world. Indonesia’s competitiveness ranking has increased by 10 positions from rank 44 in 2022 to rank 34 this year.
Indonesia managed to improve the ranking of all the main components, namely the components of economic performance, efficient government, efficient business and infrastructure availability. Apart from that, the increase in competitiveness is also followed by the prospect of Indonesia’s investment financing which is also increasingly attractive, especially with the affirmation of Indonesia’s sovereign rating by various international rating agencies.
“Our growth at the end of 2023 is still targeted at 5.3 percent according to the state budget, and the lever is in the third quarter. Later we will see contributions from the mining, natural resources and palm oil sectors, all of which depend on commodity prices, but now they are approaching normal prices, which means that they can be boosted in terms of export volume, and also related to other superior products such as chemical products and iron-steel.,” concluded the Coordinator Minister.
