Indonesia economy to grow 5.2% in 2024 as investments pick up steam: Jokowi

[JAKARTA] Indonesian President Joko Widodo, who is in the final months of his term, expressed confidence that South-east Asia’s largest economy will see growth of 5.2 per cent in 2024 – higher than what the International Monetary Fund (IMF) and World Bank have predicted.

Speaking at a seminar in Jakarta on Friday (Dec 22), he said he remained bullish about the economy’s performance in the next 12 months, despite many forecasts that Indonesia will face downside risks as the global commodity boom loses momentum.

The IMF expects Indonesia’s gross domestic product (GDP) to grow by 5 per cent next year, a shade higher than the World Bank’s 4.9 per cent forecast. Indonesia’s central bank has given a range of between 4.7 and 5.5 per cent.

Widodo said the country will have to grapple with numerous challenges in 2024, including a global economic slowdown, weakening consumption, high interest rates and geopolitical tensions – all of which could dampen investor sentiment.

“Navigating the vast sea of global economic uncertainty is a challenging task. We want to achieve better economic growth, but we must proceed with caution,” said the 62-year-old president, who is approaching the tail end of his second and final term in office.

He said that the economy’s performance will depend on the country’s ability to attract investments. The government has set a target of attracting 1,650 trillion rupiah (S$141.2 billion) in combined foreign and domestic investments in 2024, in order to achieve GDP growth of more than 5 per cent.

South-east Asia’s largest economy is gearing up to hold its presidential elections in February 2024, after a decade under Widodo’s presidency.

The former governor of Jakarta has assured investors and critics that the government’s plans to establish a new capital city, Nusantara, in East Kalimantan will go ahead, no matter who wins the next election.

During a visit to the new capital’s site earlier this week, Widodo attended ceremonies to break ground on 13 new projects with a total investment of 41 trillion rupiah. These include a new police station, a general hospital and an apartment complex for civil servants.

Last month, Widodo inaugurated the construction of a new airport that is scheduled to open in December 2024, at a cost of 4.2 trillion rupiah.

“What is truly encouraging and gives me optimism is the remarkable enthusiasm displayed by all the investors (in Nusantara),” he said.

The leading presidential candidates, Prabowo Subianto and Ganjar Pranowo, have so far pledged to continue Widodo’s economic policies. Rival candidate Anies Baswedan, however, has vowed to walk back some of those, including the plan to build a new capital.

The winner of the Feb 14 election will be announced in March. But if no candidate obtains more than 50 per cent of the eligible votes, a run-off poll will be held in June.

At the same forum, former finance minister Muhamad Chatib Basri said Indonesia’s economic policy needs to focus on the middle class, to minimise the risk of social unrest.

The country is dealing with weakened consumer confidence and purchasing power. The consumer price index decreased to 123.6 points in November from 124.3 points in the previous month, according to latest data from the central bank.

Household consumption, which accounts for around 52 per cent of total GDP, has weakened to an annual rate of 5 per cent, hindered by high interest rates. The country is also facing soaring food prices due to unusually dry weather that has caused shortages of rice, sugar and other staples.

Labour unions have demanded that the government raise the national minimum wage by 15 per cent in 2024, given the relatively strong economic performance this year.

Speaking at the forum, Mohammad Faisal, an economist from the Center of Reform on Economics, said granting this wage increase would calm workers in this election year and give them greater purchasing power at a time of high inflation.

He noted, however, that much will depend on the outcome of the elections, and that there would likely be some delays in implementing policies due to a lag between the end of the polls and the formation of a new government.