Indonesian rupiah notes.
Adek berry | AFP | Getty Images
Indonesia’s economic growth climbed to its strongest level in nine years last year, fueled by revived spending as pandemic restrictions were lifted and as a global commodity boom sent exports to a record high.
Southeast Asia’s largest economy benefited from high global commodity prices following the war between Russia and Ukraine, which benefited the rupiah and improved the country’s current account balance. However, growth momentum slowed in the last quarter as prices eased and weaker global demand, high inflation and rising interest rates could weigh on activity this year.
The economy grew 5.31% in 2022, Statistics Indonesia data showed on Monday, the best annual growth rate since 2013 and faster than the 5.29% expected in a Reuters poll.
In the fourth quarter, gross domestic product grew 5.01% on an annualized basis, compared to growth of 4.84% predicted by the survey and 5.72% in the previous three months.
Household consumption, which accounts for more than half of Indonesia’s GDP, accelerated last year, particularly helped by travel-related spending as Covid-19 restrictions eased.
Indonesia lifted most restrictions on movement over the past year after daily cases fell and vaccination rates rose, driving up household consumption. All remaining measures were lifted at the end of the year.
Investment rose 3.87% last year, similar to 2021, but has yet to return to pre-pandemic levels, according to the Bureau of Statistics.
Exports grew on the back of rising commodity prices after the war between Russia and Ukraine began in February. Indonesia is a major supplier of thermal coal, palm oil and nickel steel.
The country’s shipments hit a record high of $292 billion last year.
Meanwhile, government spending slumped in 2022 as Jakarta began withdrawing from pandemic-era health and social spending.
Government officials said economic activity could slow this year and forecast a global economic downturn that would lead to a further fall in commodity prices and a slowdown in Indonesian exports.
“China’s economic reopening could indeed support demand, but commodity prices are still prone to prolonged moderation amid prospects of increased supply and lower demand in the US and eurozone,” said Faisal Rachman, economist at Bank Mandiri.
This year’s growth is likely to be supported by household consumption as long as inflation is controlled and people’s mobility continues to improve, Faisal said, forecasting 5.04% growth in 2023.
Jakarta has set a target of 5.3% for economic growth in 2023, but Finance Minister Sri Mulyani Indrawati said last week that GDP growth in 2022 would be slightly below that rate.
Comments are closed.