THE CENTRAL STATISTICS AGENCY Indonesia's Economic Growth in the Second Quarter Reaches 5.05%
The Central Statistics Agency (BPS) announced that Indonesia's economy grew by 5.05% year-on-year (YoY) in the second quarter of 2024. This performance is lower than the 5.11% growth in the first quarter of 2024 and the 5.17% growth in the second quarter of 2023. An official from BPS's Balance Sheet and Statistical Analysis Department stated that Indonesia's economic growth in the second quarter of 2024 was 5.05% compared to the same quarter in 2023 (YoY) and 3.79% compared to the first quarter of 2024 (quarter-on-quarter, QoQ).
In terms of expenditure, all components showed positive growth in the second quarter of 2024. The largest contributor to GDP was household consumption, with a contribution rate of 54.53%. This was driven by religious holidays and extended school holidays, resulting in a 4.93% YoY increase. Meanwhile, government consumption grew by 1.42%, largely due to relatively high absorption rates of capital and goods expenditures, at 39.5% and 6.1% respectively, mainly due to the disbursement of the 13th-month salary for civil servants (ASN) in June 2024.
Gross fixed capital formation recorded strong growth of 4.43% YoY, driven by a 5.31% increase in construction investment. Significant absorption of government capital expenditure, related to the completion of various National Strategic Projects (PSN), including the development of the new capital (IKN), was one of the factors driving the increase in investment. Private sector real estate construction activity also continued to show a growth trend, closely linked to the government’s VAT DTP housing policy. Meanwhile, investment activities related to machinery parts and equipment grew by 6.08%. The strong performance of private investment activities is also reflected in the 22.49% growth in PMA and PMDN realizations and the manufacturing PMI remaining in the expansionary region in the second quarter of 2024, with reduced election-related uncertainty encouraging investment activities.
Exports of goods and services showed high growth in the second quarter of 2024, with an 8.28% YoY increase, up from the 1.37% growth in the previous quarter. Goods exports grew by 7.73%, mainly driven by increased exports of steel and mineral fuels, with export volumes up by 21.6% and 8.3% respectively.
Regionally, all areas showed positive growth in the second quarter of 2024, though with some differences. The Maluku and Papua regions recorded the highest economic growth at 8.45% YoY, due to the government’s mineral downstreaming policy. The Kalimantan region also consistently posted higher economic growth than the national average, with a 5.22% YoY increase, driven by increased local economic activity related to the IKN development. On the other hand, Sumatra's economic growth has been below the national average in recent years. Meanwhile, Java, as the main contributor to the economy, achieved a relatively moderate growth of 4.92%, supported by activities in the manufacturing and service sectors. The Bali and Nusa Tenggara regions grew by 6.84%, supported by increased tourism activity.
According to data provided by BPS, INDEF's senior economist assessed that the target of 5.2% economic growth set by President Joko Widodo for 2024 would be difficult to achieve. To meet this target, economic growth in the first and second quarters of 2024 must exceed 5.1%. In his view, this is not ideal, as the target is 5.2%. If the target is 5.2% and growth in both quarters is already below 5.1%, it will be challenging in the third and fourth quarters of 2024. Typically, points are gathered in the first and second quarters, so he believes this is not ideal because it is evident that the 5.2% target set by the Jokowi administration does not have a promising outcome. The 5.05% economic growth in the second quarter of 2024 was supported by several holidays. Without this, he believes Indonesia’s economic growth might have fallen below 5%. He also issued a warning regarding Indonesia's economic growth in the third quarter of 2024 (July to September). If the government does not encourage consumption, it will be difficult for Indonesia's economy to maintain a 5% growth level. Various factors contribute to this situation, ranging from signs of deflation to a lack of motivation for people to shop, leading to a loss of economic momentum in the third quarter of 2024. To keep the wheels of Indonesia's economy turning in the third quarter of 2024, the government must increase government consumption, even though its contribution to the national economy is only 8%. Other efforts include maintaining the flow of imported goods to keep domestic industries active. Additionally, consumption by regional head election (Pilkada) candidates is expected to stimulate economic growth. Government consumption is also related to regional elections, and in this regional election, the government and potential candidates are expected to accumulate spending to increase their influence, particularly through government expenditure to encourage public consumption.
