Indonesia's Economic Growth 2014-2024 Stagnant at 5 Percent

JAKARTA, KOMPAS – Indonesia's economy grew by 5.03 percent throughout 2024. This realization slowed compared to 2023 and was also below the government's target. The manufacturing industry and household consumption, as the two main engines of the economy, grew modestly below potential. Exports also slowed down.

The Central Statistics Agency (BPS) recorded that Indonesia's gross domestic product (GDP) at current prices (ADHB) throughout 2024 is Rp 22,139 trillion. Meanwhile, GDP at constant prices (ADHK) is valued at Rp 12,920 trillion.

Throughout 2024, the economy grew by 5.11 percent year-on-year in the first quarter. Subsequently, the figures were 5.05 percent in the second quarter, 4.95 percent in the third quarter, and 5.02 percent in the fourth quarter.

With that achievement, Indonesia's economy grew by 5.03 percent throughout 2024. This is lower than the economic growth of 5.05 percent in 2023 and also below the government's target of 5.2 percent.

The achievement is in line with the prediction that the 2024 economic growth target will be difficult to achieve. Moreover, the two main engines of Indonesia's economy, namely the manufacturing industry and household consumption, had significantly weakened throughout 2024.

Acting Head of BPS Amalia Adininggar Widyasanti, Wednesday (5/2/2025) stated that Indonesia's economic growth in 2024 indeed slowed down compared to 2023. One of the factors holding back the pace of economic growth is the condition of net exports, which reflects trade performance.

Although exports in the fourth quarter of 2024 grew positively by 7.63 percent, the growth rate is still below imports, which grew by 10.36 percent. Throughout 2024, exports also grew by 6.51 percent, but still below imports, which grew by 7.95 percent.

As a result of export performance being "outperformed" by imports, the contribution of net exports (the difference between export value and import value) to economic growth was negative, namely minus 0.2 percent in the fourth quarter of 2024 and minus 0.01 percent throughout 2024. This net export performance is smaller compared to 2023.

"So, if we look at the sources of growth, one component that somewhat holds back our economy from growing higher this year is net exports," said Amalia in a press conference held in a hybrid format.

One of the striking things about Indonesia's economic growth performance in 2024 is household consumption which has consistently grown below 5 percent throughout the year, or below its potential. BPS noted that household consumption has slowed since the Covid-19 pandemic.

In terms of expenditure components, household consumption is still the main contributor to economic growth with a contribution of up to 54.04 percent to GDP formation. However, consumption continues to grow below 5 percent.

In Q4-2024, household consumption grew by 4.98 percent. This continues the growth trend of below 5 percent in Q1 (4.91 percent), Q2 (4.93 percent), and Q3 (4.91 percent).

Amalia said, although consumption is still growing below 5 percent, the condition is improving compared to 2023. As a comparison, in 2023, consumption grew 4.82 percent. However, in 2024, consumption strengthened slightly to 4.94 percent or the same as 2022.

"The consumption components that grew above 6 percent were consumption for the transportation and communication sector which grew 6.56 percent, then restaurant and hotel consumption which grew 6.53 percent. For clothing and footwear consumption, it only grew 2.55 percent," said Amalia.

The second contributor to economic growth is investment or gross fixed capital formation (PMTB) which grew by 4.61 percent in 2024 with a contribution of 29.15 percent to GDP. PMTB grew positively because it was supported by an increase in the realization of foreign and domestic investment, as well as PMTB activities by the government and private sector which grew positively.

Export performance also continued to grow positively by 6.51 percent with a contribution of 22.18 percent to GDP. However, imports grew faster, namely 7.95 percent and contributed up to 20.39 percent.

Meanwhile, thanks to the 2024 General Election and Regional Election, government consumption and consumption of non-profit institutions serving households (LNPRT) were also recorded to have grown positively. They grew by 6.61 percent and 12.48 percent respectively.

When viewed from the business sector component side, all business sectors grew positively throughout 2024. The manufacturing industry, which grew by 4.43 percent, is still the highest source of growth with a contribution of 18.98 percent to GDP.

The growth of the manufacturing industry, according to Amalia, is driven by domestic and foreign demand. The sectors that drive manufacturing performance are the food and beverage industry which grew by 5.9, the basic metal industry which grew by 13.34 percent, and the metal goods, computers, electronics, optics, and electrical equipment industry which grew by 6.16 percent.

In addition to manufacturing, the economy is also supported by the trade sector which grew by 4.86 percent, agriculture which grew by 0.67 percent, construction which grew by 7.02 percent, mining which grew by 4.90 percent, and transportation and warehousing which grew by 8.69 percent. The five sectors contributed up to 63.9 percent to the Indonesian economy.

However, in line with household consumption which has grown slowly since the post-pandemic, the performance of the manufacturing industry has also been the same. BPS noted that since the pandemic ended, the growth of the manufacturing industry has been 4.89 percent (2022), 4.64 percent (2023), and 4.43 percent (2024).

Ideally, as the highest contributor to GDP in terms of business fields, the manufacturing industry can grow above 5 percent or equal to the rate of economic growth. Likewise, household consumption should be the highest contributor to GDP in terms of expenditure.

Separately, a researcher at the Institute for Economic and Community Research, Faculty of Economics and Business, University of Indonesia (LPEM FEB UI), Teuku Riefky, assessed that, reflecting on the economic conditions throughout 2024, Indonesia will enter 2025 with an economic condition full of weakness.

"From declining purchasing power, a shrinking middle class, and a prolonged decline in sectoral productivity. All of that gives a clear signal that there are significant structural problems as reflected in our economic growth figures throughout 2024," said Riefky.

Looking at the challenges from both domestic and global, he assessed that the Indonesian economy will experience difficult times ahead. "Without the right mitigation strategy to withstand external risks and concrete structural economic reforms, our economy may not be able to grow consistently by 5 percent or more, let alone reach the target of 8 percent," he said.