Indonesia’s economy last year grew at its fastest rate in nine years, spurred by increased spending as a result of the easing of pandemic restrictions and a global commodity boom that brought exports to a record high.
Southeast Asia’s largest economy benefited from rising global commodity prices during the Russia-Ukraine war, which boosted the rupiah and helped the country’s current account. However, growth slowed in the fourth quarter as prices fell, and lower global demand, rising inflation, and an increase in interest rates might all be a drag on activity this year.
According to Statistics Indonesia figures released on Monday, the GDP expanded by 5.31% in 2022, the fastest rate since 2013, and faster than the 5.29% predicted in a Reuters poll.
Gross domestic product increased 5.01% year on year in the fourth quarter, compared to the poll’s prediction of 4.84% growth and 5.72% in the preceding three months.
Household consumption, which contributes for more than half of Indonesia’s GDP, increased last year, aided in part by reduced Covid-19 regulations. Last year, Indonesia eliminated most transportation restrictions as daily cases decreased and vaccination rates increased, driving boosting household spending. At the conclusion of the year, all remaining measures were repealed.
According to the statistics office, investment climbed 3.87% last year, similar to growth in 2021, but has yet to recover to pre-pandemic levels.
After the Russia-Ukraine war began in February, exports increased due to rising commodity prices. Indonesia is a significant producer of thermal coal, palm oil, and nickel steel.
Last year, the country’s shipments reached a new high of $292 billion.
Meanwhile, government expenditure in 2022 fell as Jakarta began to reduce pandemic-era health and social spending.
Government authorities have predicted that economic activity will decrease this year, owing to a worldwide economic crisis that will cause commodity prices to fall further and Indonesia’s exports to stall.
“While China’s economic reform may bolster demand, commodities prices remain vulnerable to further declines due to greater supply and decreased demand in the United States and Europe,” said Faisal Rachman, Bank Mandiri Economist.
This year’s growth will most likely be supported by household spending as inflation remains under control and people’s mobility continues to improve, according to Faisal, who predicts growth of 5.04% in 2023.
Jakarta has set a 5.3% growth target for 2023, although Finance Minister Sri Mulyani Indrawati stated last week that GDP growth will be somewhat lower in 2022.