Indonesia’s Economic Growth to Moderate in 2023, 2024 — ADB (2024)

JAKARTA, INDONESIA (4 April 2023) — Indonesia’s economy is expected to grow by 4.8% in 2023 and 5.0% in 2024 as the commodity boom wanes and domestic demand normalizes, according to a report by the Asian Development Bank (ADB) released today.

“Booming commodity exports drove growth to 5.3% in 2022, making up for modest domestic demand,” said ADB Country Director for Indonesia Jiro Tominaga. “Global headwinds in 2023 are projected to cut export growth, although the current account should continue to be close to balance. But because private consumption accounts for a large share of Indonesia’s economy, as consumer spending further normalizes and benefits from the tapering off of inflation, this should put a floor on growth. Investment, however, is likely to remain modest as businesses wait-and-see.”

The export boom generated windfall revenues that enabled Indonesia to cut the budget deficit below the statutory ceiling of 3% of gross domestic product, one year ahead of schedule, says the Asian Development Outlook (ADO) April 2023. Inflation peaked at almost 6% in September, way above the central bank’s 4% inflation ceiling. However, it has been moderating, on easing commodity prices and monetary policy tightening, and is projected to fall to about 3.5% by December and to average 4.2% in 2023, the report adds.

A concern for the medium to long term is that earning losses by workers and learning losses by children during the pandemic could reduce potential growth, says the report. Most key labor indicators have improved compared to their 2020 levels but have not returned to their pre-pandemic levels. These include unemployment, informality, and real wages. One measure that can mitigate labor market scarring is the government’s Pre-Employment Card Program, which provides technical and vocational skills through digital learning, training to start businesses, and scholarships.

ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 member-countries—49 from the region.