Arnoldus Kristianus, Jakarta – Finance Minister Sri Mulyani Indrawati has projected Indonesia's economic growth to reach 5.1 percent by the end of 2024, slightly below the 5.2 percent target outlined in the 2024 state budget, but higher than the 5.05 percent recorded in 2023.
According to Sri Mulyani, the upcoming 2024 Regional Election in November is expected to boost household consumption, a major contributor to national economic growth. Additionally, the festive season in the fourth quarter, including Christmas and New Year celebrations, will further enhance consumer spending.
"During national holidays, we typically see increased mobility, which positively contributes to consumption in our economy," she said in a press conference following the Financial Stability Committee's (KSSK) quarterly meeting at Bank Indonesia on Friday.
The Central Statistics Agency (BPS) reported that Indonesia's economic growth for the second quarter of 2024 reached 5.05 percent. Meanwhile, the World Bank has upgraded its forecast for Indonesia's gross domestic product (GDP) growth, projecting an average of 5.1 percent per year from 2024 to 2026. This revision marks an increase from the previous projection of 4.9 percent for both 2024 and 2025.
From a production standpoint, the manufacturing and trade sectors are anticipated to support national economic growth, aided by stable purchasing power, low inflation, and increased productivity. Sri Mulyani assured that government policies aimed at maintaining purchasing power and price stability will continue, alongside social protection programs crucial for economic activity.
The KSSK reported stable financial system conditions in the third quarter of 2024, reflecting eased pressures in global financial markets following monetary policy easing by developed nations. Despite this relief, the committee remains vigilant against potential external economic shocks that could impact Indonesia's economy.
Sri Mulyani highlighted the uncertainty in global financial markets due to the recent easing of monetary policies by major economies, particularly as inflationary pressures begin to subside. The US Federal Reserve cut its benchmark interest rate for the first time since the Covid-19 pandemic in September 2024, reducing the rate to a range of 4.75 percent to 5 percent. More cuts are expected to follow.
This decision positively impacted the yield on US Treasury bonds, with the two-year yield falling below that of ten-year bonds, marking a shift in bond market dynamics. Furthermore, both the European Central Bank and China's People's Bank of China have also lowered their benchmark rates, reducing uncertainty in global financial markets and facilitating capital flows from developed to emerging markets, including Indonesia.
"The era of higher interest rates is waning, leading to increased foreign capital inflows into emerging markets, including Indonesia," Sri Mulyani said, indicating a positive trend for the country's economic outlook.