Depth report

　　

According to the latest data released by Indonesia's Central Statistics Bureau, Indonesia's economic growth rate in the third quarter of 2024 was 4.95%, which failed to reach 5%, lower than 5.11% in the first quarter of this year and 5.05% in the second quarter, and also the lowest quarterly growth rate since the third quarter of 2023.

Amalia, acting director of Indonesia's Central Statistics agency, said the low economic growth in the third quarter of 2024 was "in line with the seasonal pattern", that is, the probability of economic growth in the third quarter is lower than in the previous two quarters. Indonesia's economic growth in the third quarter of 2023 was 4.94%, compared to 5.17% and 5.03% in the first and second quarters, respectively. Economic growth in the third quarter of 2022 was 4.83%, down from 5.01% and 5.44% in the first and second quarters.

Data show that in the third quarter of 2024, there are eight major industries in Indonesia whose growth is lower than the overall economic growth rate, including the manufacturing industry, which contributes the most to economic growth, accounting for 19.02%, an increase of only 4.72%. Other industries that are growing more slowly than the overall economy are agriculture, trade, mining and educational services. Industries that are growing faster than the overall economy include construction, transportation and storage, information and communications, financial services, accommodation and catering, business services, health services, and other services.

From a regional perspective, only Sumatra and Java recorded slower growth than the national economy, with Sumatra registering 4.48% growth, down from 4.49% in the same period last year. In Java, growth was 4.92%, up slightly from 4.84% in the same period last year. Among other regions, the highest growth was in Maluku and Papua, at 6 per cent, but down from 9.10 per cent in the same period last year; Sulawesi followed with 5.87 percent growth, also down from 6.42 percent in the same period last year. Bali and Nusa Tenggara grew 5.28% year-on-year, up from 3.43% in the same period last year; Kalimantan grew 5.20 per cent, up from 4.83 per cent in the same period last year.

Sluggish household consumption was one of the main reasons for the weak economic growth in the third quarter. Data show that household consumption is still an important part of the national economy, accounting for 53.08%, but in the third quarter of 2024, only 4.91% growth, lower than the economic growth rate in the same period, continuing the weak trend of consumption since last year. According to the data of Indonesia's Central Bureau of Statistics, Indonesia's household consumption growth rate in the third quarter of 2023 was 5.05%, and even reached 5.40% in the third quarter of 2022.

Indonesia's real economic growth in the third quarter of 2024 was lower than expected. Earlier, Indonesian Finance Minister Mulyani said that in the third quarter of 2024, the economy will continue the growth trend of the first and second quarters, and continue to grow by more than 5%. Indonesia's coordinating Minister for Economic Affairs, Erlanga Hatato, also said that economic growth in the third quarter is expected to reach 5.05%.

However, Teuku Rivki, an economist at the Institute of Economics and Social Research at the University of Indonesia's School of Economics and Business, believes that it is difficult for Indonesia's economy to achieve substantial growth of more than 5% in the third quarter of 2024, mainly because of the lack of new economic growth points, weak purchasing power and lack of seasonal factors. Rivki said growth in the first half of the year was supported by seasonal factors, including the Indonesian general election and Ramadan in the first quarter and Eid al-Fitr, school holidays and several religious festivals in the second quarter, while there were no similar supportive factors in the third quarter.

A further slowdown in economic growth in the third quarter of 2024 will make it more difficult for Indonesia to achieve its full-year growth target. Indonesia's full-year economic growth target is 5.2%, compared with 5.03% in the January-September period. The adverse effects of weak purchasing power and a contraction in manufacturing remain. The latest data showed that Indonesia's manufacturing purchasing managers' index was only 49.2 in October, which means that Indonesia's manufacturing has been in the contraction zone for four consecutive months. Arif, a spokesman for Indonesia's industry ministry, said the contraction would continue without major policy changes to support manufacturing.

However, Indonesia's economy is still expected to grow by more than 5% for the whole of 2024. According to previous years' experience, economic growth in the fourth quarter was higher than in the third quarter, and Indonesia's economic growth in the fourth quarter of 2022 and 2023 reached 5.01% and 5.04%, respectively, which were higher than the previous quarter. At the same time, the economy in the fourth quarter of 2024 will also be supported by regional elections and year-end holidays. Rivki expects Indonesia's economic growth to be in the range of 5.00% to 5.05% in 2024.