Consumption Weakens, Indonesia's Economic Growth in the Third Quarter Only Reached 4.94%

JAKARTA. Indonesia's economic conditions began to slow down. Statistics Indonesia (BPS) noted that Indonesia's economic growth in the third quarter of 2023 was only 4.94% on an annual basis or Year-on-year (YoY), lower than the growth in the previous quarter which reached 5.17%.

Quoted from cnbcindonesia.com, Acting Head of BPS Amalia Adininggar Widyasanti stated the economic slowdown in the third quarter was in line with the pattern that occurred in previous years. "Growth in the third quarter is always lower than the second quarter, except in 2020 when there was a pandemic," said Amalia during a press conference at her office, in Jakarta, on Monday (6/11).

Based on the expenditure component, the largest source of Indonesia's economic growth still comes from household consumption, with a growth of 5.06% (yoY) and contributed 52.62% to the Gross Domestic Product (GDP). However, household consumption growth in the third quarter was lower than last quarter's 5.22%.

According to Amalia, the weakening contribution of household consumption was triggered by seasonal driving factors, such as the Eid al-Fitr and Eid al-Adha holidays as well as international and national events that did not occur again in the third quarter. "These events occurred in the second quarter so that in the third quarter it was not as strong as in the previous quarter," she said.

Meanwhile, Minister of Finance Sri Mulyani Indrawati admitted that the slowdown in economic growth in the third quarter was partly due to weak household consumption growth compared to the previous quarter. This consumption growth was not in line with expectations, because the government initially believed that the level of consumer confidence was still high.

"If we look at it compared to the outlook that has been conveyed so far, the consumption released by BPS is indeed relatively lower than we expected. We need to see what the effect is. Is it psychological with El Nino conditions, rising rice prices, and various factors," she said as quoted from kontan.co.id.

Even so, Sri Mulyani emphasized that another component of economic growth, Gross Domestic Fixed Capital Formation (PMTB), was 5.7%, even much higher than the government had projected. "This is confirmed by the manufacturing industry and capital inflow, so this is still a very positive story from Indonesia that we will try to maintain," she added.