The Indonesian economy in 2023, as measured by Gross Domestic Product (GDP) at current prices, reached Rp20,892.4 trillion and GDP per capita reached Rp75.0 million or US$4,919.7. Indonesia's economy in 2023 grew by 5.05 per cent, lower than the achievement in 2022 which experienced growth of 5.31 per cent. 

Robust production activity underpins domestic economy

1. Increased Production Activity:

• Bank Indonesia's Prompt Manufacturing Index (PMI) is still in the Expansion Zone reaching 51.20% higher than Quarter 4-2022 of 50.06% (source: BI)

• The utilised production capacity of Quarter 4-2023 was 73.91%, higher than Quarter 4-2022 of 71.49%. (source: BI)

• Cement production grew by 13.84% (y-on-y) and 3.81% (c-to-c). (source: ASI)

• Electricity sales during Quarter 4-2023 grew by 9.64%, mainly driven by business segment electricity consumption which grew by 14.41% (y-on-y). (source: PLN)

2. Increased Investment Realisation:

• Vehicle-type capital goods: an increase in domestic vehicle products by 12.28% and imports by 41.10% (c-to-c). (source: Gaikindo)

• PMDN and PMA realisation grew 16.20% (y-on-y). (source: BKPM)

• State and local government capital expenditure grew positively, strengthening compared to the previous period: 32.22% (y-on-y) and 26.31% (c-to-c). (source: APBN capital expenditure realisation)

3. Economic Policy Responses to Growth Drivers: 

• Government policy in controlling inflation: inflation in December 2023 was recorded at 2.61% (y-on-y), since June 2023 it has always been below 4.00% (source: BPS)

In terms of production, the highest growth occurred in the Transportation and Warehousing Business Field at 13.96 per cent, followed by Other Services at 10.52 per cent, and Accommodation and Drinking Food Provision at 10.01 per cent. Meanwhile, the Processing Industry, which has a dominant role, grew by 4.64 per cent. Meanwhile, Agriculture, Forestry and Fisheries and Wholesale and Retail Trade; Car and Motorcycle Repair grew by 1.30 per cent and 4.85 per cent respectively.

• Processing Industry grew steadily due to strong domestic and global demand:
  The Base Metal Industry grew by 14.17% due to increased overseas demand, such as iron and steel base metal products.
• Industri Barang Logam; Komputer, Barang Elektronik, Optik dan Peralatan Listrik tumbuh 13,67% sejalan dengan peningkatan produksi industri barang logam bukan mesin dan peralatan.
• The Transport Equipment Industry grew by 7.63% due to an increase in domestic demand for motorcycles.
• Paper and Paper Goods Industry; Printing and Recording Media Reproduction grew 4.52% driven by an increase in demand for printing ahead of the 2024 elections.

Trade grew in line with the increased supply of domestic goods:

• Trade in Automobiles, Motorcycles, and Reparations grew by 4.5%, due to increased sales of motorcycles.
• Wholesale and Retail Trade, Not Cars and Motorcycles grew by 4.92% due to an increase in domestic trade activities.

In terms of expenditure, the highest growth was achieved by Consumption Expenditure of Nonprofit Institutions Serving Households (PK-LNPRT) by 9.83 per cent, followed by the Household Consumption Expenditure Component (PK-RT) by 4.82 per cent; Gross Fixed Capital Formation (PMTB) Component by 4.40 per cent; PK-P Component by 2.95 per cent; and the Export of Goods and Services Component by 1.32 per cent. Meanwhile, the Import Component of Goods and Services (which is a deduction factor in GDP by Expenditure) contracted by 1.65 per cent.

Quarter IV-2023 Economy

Indonesia's economy in the fourth quarter of 2023 against the fourth quarter of 2022 grew by 5.04 per cent (y-on-y). In terms of production, the Transportation and Warehousing Business Field experienced the highest growth of 10.33 per cent. While in terms of expenditure, the PK-LNPRT component experienced the highest growth of 18.11 per cent.

Indonesia's economy in the fourth quarter of 2023 against the previous quarter grew by 0.45 per cent (q-to-q). In terms of production, the Government Administration, Defence and Compulsory Social Security Business Field experienced the highest growth of 19.81 per cent. In terms of expenditure, the Government Consumption Expenditure Component (PK-P) experienced the highest growth of 39.13 per cent.

Third Quarter 2023 Economy

Indonesia's economic growth in 2023 continued to improve. In the first quarter of 2023 the economy grew by 5.03% (yoy), in the second quarter of 2023 the growth was recorded at 5.17% (yoy) and in the third quarter of 2023 the growth slowed down slightly, recorded at 4.94% (yoy). In the fourth quarter of 2023, growth was estimated to be around 4.5-5.3%. The sustained domestic economic growth in the range of 5 per cent is due to the demand for domestic needs such as government and public spending that remains high.

In Q3-2023, overall exports contracted by 4.26% (yoy) due to declining demand for goods exports, in line with the global economic slowdown, deeper than the 2.97% (yoy) contraction in Q2-2023. Meanwhile, imports corrected by 6.18% (yoy) in July-September this year, deeper than the 3.06% contraction in April-June this year. This is the second time exports and imports have contracted since the fourth quarter of 2020 or the last eight quarters. However, service exports continued to grow strongly on the back of an increase in foreign tourist visits.

Indonesia's economic growth, which is currently maintained, is reflected in the Business Field and spatial aspects. By Business Field (LU), most of them in the third quarter of 2023 continued to record positive growth, mainly supported by Manufacturing Industry, Wholesale and Retail Trade, and Construction. The growth of these business fields was supported by high domestic demand. 

Indonesia needs foreign direct investment (FDI) to drive faster economic growth to become a developed country by 2045. Indonesia's goal for 2045 is a Nominal GDP of US$9.8 trillion with a GNI (gross national income) per capita of US$30,300 and a manufacturing contribution of 28% with a labour absorption of 25.2%.

To grow more sustainably and achieve its 2045 targets, Indonesia needs FDI due to the large saving-investment gap, which cannot be met by relying solely on the availability of domestic savings. For the 2024 growth target of 5.2 per cent, investment from various economic actors is required at around IDR 6,900 trillion. 

Indonesia currently ranks 73rd in the Ease of Doing Business 2023 ranking out of 190 countries. Of the 10 assessment indicators, Indonesia's best achievement is in the ease of obtaining an electricity connection. This data is supported by the achievement of the national electrification ratio which has reached 99.72% as of June 2023. Meanwhile, Indonesia's worst assessment is on the ease of starting a business. 

Indonesia's inflation in September 2023 was maintained at 2.28% (yoy) and became the lowest since February 2022. Manufacturing PMI (Purchasing Managers Index) continues to be at an expansionary level, public optimism in terms of IKK (Key Performance Indicators) is still quite high, and the Real Sales Index is still growing positively, and the Trade Balance in September 2023 is still a surplus of USD3.42 billion, continuing the surplus for 41 consecutive months.

The Indonesian economy in the third quarter of 2023 based on the Gross Domestic Product (GDP) at current prices reached IDR5,296.0 trillion. Indonesia's economy in the third quarter of 2023 against the previous quarter experienced growth of 1.60 per cent (q-to-q). 

In terms of production, the Construction Business Field experienced the highest growth of 5.87 per cent. While from the expenditure side, the Gross Fixed Capital Formation (PMTB) component experienced the highest growth of 7.70 per cent.

Indonesia's economy in the third quarter of 2023 against the third quarter of 2022 grew by 4.94 per cent (y-on-y). In terms of production, the Transportation and Warehousing Business Field experienced the highest growth of 14.74 per cent. In terms of expenditure, the Consumption Expenditure Component of Non-Profit Institutions Serving Households (PK-LNPRT) experienced the highest growth of 6.21 per cent.

As of Q3-2023, Indonesia's economy grew by 5.05 per cent (c-to-c). In terms of production, the largest growth occurred in the Transportation and Warehousing Business Field at 15.30 per cent. Meanwhile, from the expenditure side, the largest growth occurred in the PK-LNPRT Component by 7.01 per cent.

Leading sectors of the Indonesian economy such as Manufacturing Industry, Agriculture, Trade, Mining, and Construction continue to grow.

The three business sectors with the highest growth were Transportation & Warehousing, Other Services, and Accommodation & Eating & Drinking.

In terms of business (production), economic growth was driven by, among others, increased production activities, community mobility, foreign tourist visits, the holding of several national and international events.

Inflation

In October 2023 there was year on year (y-on-y) inflation of 2.56 per cent with a Consumer Price Index (CPI) of 115.64.

Y-on-y inflation occurred due to an increase in prices as indicated by the increase in all expenditure group indices, namely: food, beverages and tobacco group by 5.41 per cent; clothing and footwear group by 0.85 per cent; housing, water, electricity and household fuel group by 1.16 per cent; household supplies, equipment and routine maintenance group by 1.89 per cent; health group by 2.04 per cent; transportation group by 1.20 per cent; information, communication, and financial services group by 0.11 per cent; recreation, sports, and culture group by 1.50 per cent; education group by 1.99 per cent; food and beverage supply/restaurant group by 2.21 per cent; and personal care and other services group by 3.67 per cent.

The month to month (m-to-m) inflation rate for October 2023 was 0.17 per cent and the year to date (y-to-d) inflation rate for October 2023 was 1.80 per cent.

The October 2023 core component y-on-y inflation rate was 1.91 per cent, m-to-m inflation was 0.08 per cent, and y-to-d inflation was 1.54 per cent.

In October 2023, the y-on-y inflation rate was 2.56 per cent and the y-to-d inflation rate was 1.80 per cent. The y-on-y inflation rates for October 2022 and October 2021 were 5.71 per cent and 1.66 per cent, respectively. Meanwhile, the y-to-d inflation rates for October 2022 and October 2021 were 4.73 per cent and 0.93 per cent, respectively.

Exports and Imports in December 2023

A. Export Development

• Indonesia's export value in December 2023 reached US$22.41 billion, an increase of 1.89 per cent compared to exports in November 2023. Compared to December 2022, the export value decreased by 5.76 per cent.
• Non-oil and gas exports in December 2023 reached US$20.93 billion, up 1.06 per cent compared to November 2023, and down 6.23 per cent compared to non-oil and gas exports in December 2022.
• Cumulatively, Indonesia's export value from January to December 2023 reached US$258.82 billion, down 11.33 per cent compared to the same period in 2022. Meanwhile, non-oil and gas exports reached US$242.90 billion, down 11.96 per cent.
• The largest increase in non-oil and gas exports in December 2023 against November 2023 occurred in mineral fuel commodities by US$354.3 million (10.07 per cent), while the largest decrease occurred in animal/vegetable fats and oils by US$583.7 million (22.52 per cent).
• By sector, non-oil and gas exports from the manufacturing industry in January-December 2023 fell 9.26 per cent compared to the same period in 2022, while exports from agriculture, forestry and fisheries fell 10.04 per cent and exports from mining and other products fell 20.68 per cent.
• Non-oil and gas exports in December 2023 were largest to China at US$5.77 billion, followed by the United States at US$2.07 billion and India at US$1.83 billion, with the three contributing 46.16 per cent. Meanwhile, exports to ASEAN and the European Union (27 countries) were US$3.37 billion and US$1.30 billion respectively.
• By province of origin, Indonesia's largest exports in January-December 2023 came from West Java with a value of US$36.63 billion (14.15 per cent), followed by East Kalimantan US$27.94 billion (10.79 per cent) and East Java US$22.43 billion (8.66 per cent).

B. Import Development

• Indonesia's import value in December 2023 reached US$19.11 billion, down 2.45 per cent compared to November 2023 and down 3.81 per cent compared to December 2022.
• Oil and gas imports in December 2023 were valued at US$3.37 billion, down 3.33 per cent compared to November 2023 or up 5.35 per cent compared to December 2022.
• Non-oil and gas imports in December 2023 were valued at US$15.74 billion, down 2.26 per cent compared to November 2023 and down 5.57 per cent compared to December 2022.
• The largest decrease in imports of non-oil and gas goods in December 2023 compared to November 2023 was electrical machinery/equipment and parts worth US$252.1 million (11.42 per cent). Meanwhile, the largest increase was mineral fuels US$248.3 million (89.80 per cent).
• The three largest suppliers of non-oil and gas imported goods during January-December 2023 were China US$62.18 billion (33.42 per cent), Japan US$16.44 billion (8.84 per cent), and Thailand US$10.14 billion (5.45 per cent). Non-oil and gas imports from ASEAN US$31.05 billion (16.69 per cent) and the European Union US$14.02 billion (7.53 per cent).
• According to the use of goods, the value of imports in January-December 2023 against the same period the previous year increased in the capital goods group worth US$2,828.9 million (7.78 per cent) and consumer goods US$1,714.1 million (8.64 per cent). Meanwhile, imports of raw/auxiliary materials fell by US$20,104.4 million (11.09 per cent).
• Indonesia's trade balance in December 2023 experienced a surplus of US$3.31 billion, mainly from the non-oil and gas sector of US$5.20 billion, but was reduced by a deficit in the oil and gas sector of US$1.89 billion.