Indonesia experienced its strongest economic growth in nine years in 2022, with the lifting of pandemic restrictions and a global commodity boom boosting the country’s performance.
The Southeast Asian nation, known for its thermal coal, palm oil, and nickel steel exports, recorded an annual growth rate of 5.31% according to Statistics Indonesia data. This was higher than the 5.29% expected by a Reuters poll. Household consumption, which constitutes more than half of Indonesia’s GDP, drove growth last year, particularly with the easing of Covid-19 restrictions and the rise of travel-related spending.
Although investment growth was 3.87%, similar to the previous year, it has not yet reached pre-pandemic levels. Meanwhile, exports rose to a record $292 billion, driven by the surge in commodity prices following the Russia-Ukraine conflict. However, the country’s growth momentum slowed in the fourth quarter, with predictions of weaker global demand, high inflation, and rising interest rates potentially affecting activity in 2023.
The Indonesian government has predicted a slowdown in the country’s economic activity this year, with a decline in commodity prices and a slowdown in exports as a result of the predicted global economic downturn. However, household consumption is expected to support growth in 2023, with an estimated 5.04% growth predicted by Bank Mandiri economist Faisal Rachman. Although the Jakarta government has set a target of 5.3% for economic growth in 2023, Finance Minister Sri Mulyani Indrawati expects slightly lower GDP growth in 2022.
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