Indonesia’s economy recorded its highest growth level in nine years in the year 2022.
This growth was due to rising spending levels after pandemic restrictions in Asia were lifted and global commodity demands skyrocketed in Indonesian exports.
Indonesia’s largest economy in Southeast Asia benefited from high global commodities prices following the Russia-Ukraine war that began in February 2022.
According to data from Statistics Indonesia released on Monday, the economy grew by 5.31% in 2022, its best annual growth rate since 2013.
Indonesia is a significant exporter of thermal oil, palm oil, and nickel steel. In 2022, shipments climbed to a record high of $292 billion, boosting the Indonesian rupiah and improving the country’s GDP.
Also, household consumption—contributing to about 50% of Indonesia’s GDP—spiked last year due to travel-related spending triggered by the easing of COVID-19 curbs.
Investment also grew by 3.87% in 2022, according to Statistics Indonesia. The sector’s growth, however, remains lower than pre-pandemic levels.
Indonesia relaxed most COVID-19 restrictions last year after a drop in daily recorded coronavirus cases and increased vaccination rates. The remaining restrictions were eventually ended at the end of the year.
For 2023, Indonesian government predictions foresee a slowing in the country’s economic activity. In this event, there is likely to be a reduction in commodity prices and a stall in the country’s exports.
Factors likely to slow things down this year in Indonesia’s economy include less global demand, rising inflation rates, and increasing interest rates.
“China’s economic reopening indeed could support demand,” said Faisal Rachman, an economist with Indonesia’s Bank Mandiri. “But commodity prices are still prone to weaken amid increased supply prospects and lower demand in the U.S. and eurozone.”
Household consumption is still projected to remain the major contributor to Indonesia’s economic growth in 2023. Furthermore, as the government tries to keep inflation under control and as people continue to move, the country’s economy in 2023 is predicted to grow by 5.04%, according to Rachman.
The Indonesian government has set a target of 5.3% for economic growth in 2023. However, Finance Minister Sri Mulyani Indrawati said last week that the country’s GDP growth would come in slightly below the 2022 growth rate.
