With Fastest Growth in Four Years, Indonesia Enters Trillion Dollar Club

Indonesia's full-year gross domestic product growth last year accelerated at the fasted pace in four years. (Reuters Photo/Beawiharta)

By : Adinda Normala | on 7:47 PM February 05, 2018
Category : Business, Economy, Featured

Jakarta. Indonesia's full-year gross domestic product growth last year accelerated at the fasted pace in four years, as robust exports and investment growth compensate for weak household consumption, the Central Statistics Agency, or BPS, revealed on Monday (05/02).

The agency said the economic growth rate was 5.07 percent, the highest since 2014. In 2015, the economy grew only 4.88 percent, while in 2016 at a 5.03 percent rate.

Indonesia's nominal gross domestic product was Rp 13,558 trillion, or $1 trillion at the 2017 exchange rate. This places Indonesia in a group of countries with economies above $1 trillion, like Australia, South Korea and India.

Coordinating Economics Minister Darmin Nasution said he is optimistic this year's economic growth rate will meet the government's target of 5.4 percent, as he expects domestic consumption to rise with the upcoming regional elections and the Asian Games in August.

"[We are] still optimistic … As long as we maintain the investment and exports," Darmin said.

Darmin needed to put economic growth in a more positive light, as the 5.2 percent target from the revised 2017 state budget was missed, because consumers withheld spending.

"The top 20 percent of consumers tended to postpone their spending. There were concerns about politics and aggressive tax policies. Meanwhile, the lowest 40 percent were hit by rising food prices," said Bhima Yudhistira Adinegara, an economist at the Institute for Development of Economics and Finance (Indef).

"The key now is in recovering the confidence of the upper class and ensuring timely disbursement of social aid," Bhima said.

Gundy Cahyadi, a Singapore-based economist at DBS, said infrastructure projects are expected to continue supporting economic growth in 2018.

"And if commodity prices are to remain at current levels, we expect investment growth to be more broadly based this year, with possibly positive spillover impact to household consumption," Gundy said, adding that he expects Indonesian economy to expand by 5.3 percent in 2018.

In 2017, Indonesia posted a five-year high of $11.84 billion trade surplus, thanks to the recovering global economy and rising commodity prices, with an increase in exports and imports — 9.09 percent and 8.06 percent, respectively.

Foreign direct investment grew 8.5 percent last year from the previous year.

"Trade and investments increased, but [household] consumption was still at 4.95 percent. If we want the economy to grow above 6 percent, these three components have to go hand in hand," BPS head Suhariyanto told reporters.

Show More