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Economist: Indonesia requires new source of economic growth

Tempo - January 30, 2024

Defara Dhanya Paramitha, Jakarta – Institute for Economic and Social Research – Faculty of Economics and Business, University of Indonesia (LPEM FEB UI) has recently released Indonesia's Q1 of 2024 economic outlook report, highlighting the country's economic growth, titled 'Transitional Year'.

A macroeconomy and financial market economist from LPEM FEB UI, Teuku Riefky, estimated that Indonesia's GDP has grown over 5.02-5.06 percent in the Q4 of 2023. In the previous quarter, the GDP stopped the upward trend and decreased to 4.94 percent y-o-y from 5.17 percent y-o-y in Q2 of 2023.

"Indonesia urgently needs a new source of economic growth. It's apparent from the economic growth performance that was highly dependable on the business cycle and commodities prices," he said in the report, quoted on Friday, Feb. 2, 2024.

Q3 of 2023 was regarded as the slowest growth since Q4 of 2016 due to the fall of commodity prices and the holiday season in the year's previous quarter. "It excluded the COVID-19 period in 2020 and 2021," he added.

Riefky wrote that Indonesia's ambition to become a developed country with a high GDP in 2045 requires a much higher economic growth rate than current growth.

"It requires re-industrialization and a significant increase in productivity," he said. Both are medium to long-term goals due to their structural nature in the economy.

Hence, structural reform must be the priority for the Indonesian government, Riefky said.

Entering 2024, Riefky predicted a higher global risk against Indonesia's growth due to commodity and logistics prices, weak global demand, and trade partner's economic growth.

On the other hand, Indonesia's economy could grow thanks to general election-related spending and consumption. Bank Indonesia is also estimated to have room for a lower interest which could increase economic activities in the country.

"Thus, we ascertain our previous view that Indonesia's economy will grow by 5 percent y-o-y in 2024," he concluded.

Source: https://en.tempo.co/read/1828951/economist-indonesia-requires-new-source-of-economic-growt