Indonesia’s GDP growth to exceed 5% in 2024-2026
The World Bank has published an analysis of various countries’ economic development. According to the document, Indonesia’s GDP will grow by an average of 5.1% until 2026. The experts’ forecast is for a steady rate of economic growth, which results from several factors.
The bank’s analysts believe Indonesia will be subject to positive and negative factors from 2024 to 2026. The drivers of economic growth are as follows:
– increased government spending;
– raised investment in local businesses;
– a growth in consumer demand.
Despite the favourable outlook, Indonesia’s economy will also face several constraints, including:
– lower demand for raw materials in the global market;
– increased volatility in product and energy prices;
– the impact of geopolitical uncertainty.
The World Bank’s Carolyn Turk noted strong government support. Indonesia’s GDP has been growing steadily thanks to sustainable macroeconomic policies. This makes the country attractive to investors who are willing to invest in local projects. The government has created and maintained an efficient financial distribution system. This enables the government to spend funds on priorities such as social protection and investment in human capital and infrastructure.
Overview of the current economic situation
In the spring 2024, food prices rose in Indonesia due to inflation. Consumer prices rose by 2.8% in May compared to the same period in 2023. In January this year, prices rose by 2.6%. Part of the rise in prices has been due to weather conditions. Recent rains have reduced harvests of rice and some other crops. Given these trends, analysts forecast inflation of 3% in 2024.
In April, Bank Indonesia revised its interest rate and raised it to 6.25%. This was the highest rate for the country since 2016. The reason for the increase was the outflow of investment in the global market. This had a negative impact on the exchange rate of the local currency. Analysts expect the regulator to start cutting interest rates in 2025.
The government is increasing social spending and public investment. At the same time, overall revenues are falling due to lower global demand for commodities.
The World Bank report also analyses the structural problems that have plagued Indonesia’s economy. These include:
– increased concentration in the manufacturing sector;
– regional disparities in household income;
– low rate of wage growth;
– geographical imbalance in the location of the labour force.
According to experts, accelerating economic growth will require government measures. These include reforms to improve the efficiency of the manufacturing and services sectors.
