Indonesia's previous year's GDP growth hits a 9-year high on resource crash

February 7, 2023: Indonesia’s economic growth increased to its strongest in nine years in the previous year, fueled by revived spending from the lifting of pandemic restrictions and as an international commodity boom sent exports to a record high.

Southeast Asia’s biggest economy gained from high global commodities costs in the aftermath of the Russia-Ukraine war, aided the rupiah and improved the country’s current account. But growth momentum slowed in the last quarter as prices moderated, and weaker international demand, high inflation and an increase in interest rates could drag on activity this year.

The economy extended by 5.31% in 2022, Statistics Indonesia data showed, its best annual growth rate starting from 2013, and faster than the 5.29% anticipated in a Reuters poll.

In the fourth quarter, awful domestic product expanded 5.01% annually, approximated with 4.84% growth cited by the poll and 5.72% in the last three months.

Household consumption, accounting for more than half of Indonesia’s GDP, accelerated in the previous year, mainly supported by travel-related spending as Covid-19 restrictions eased.

Indonesia released most movement curbs the previous year after daily cases decreased and vaccination rates increased, driving up household consumption. All the left-out measures were lifted at the end of the year.

The statistics bureau said that investment grew 3.87% last year, similar to 2021′s growth but is yet to return to pre-pandemic levels.

Exports grew behind soaring commodity prices after the Russia-Ukraine war started in February. Indonesia is a huge supplier of thermal coal, palm oil and nickel steel.

Last year, the country’s shipments reached a record high of $292 billion.

Meanwhile, administration spending in 2022 contracted as Jakarta began to ease back from pandemic-era health and social spending.

Administrative officials have stated that economic activity may slow this year, which predicts a global economic downturn leading to a further drop in commodity prices and a decrease in Indonesia’s exports.

“China’s economical, which reopens indeed, could support demand, but commodity prices are still ready to continue weakening amid prospects of heightened supplies and lower demand in the U.S. and eurozone,” stated Faisal Rachman, Bank Mandiri economist.

This year’s growth is likely supported by household consumption while inflation is under control and between continued betterment in people’s mobility, Faisal said, predicts growth of 5.04% in 2023.

Jakarta has made a target of 5.3% for an economic increase in 2023, but Finance Minister Sri Mulyani Indrawati said GDP growth would come in slightly below that rate in 2022.