The Indonesian economy expanded at a rate of +5.04 percent year-on-year (y/y) in Q4-2023, and so full-year growth in 2023 was recorded at +5.05 percent (y/y). While a growth rate above the five percent mark is generally considered a satisfying result, we are a bit concerned though, particularly related to household consumption that 'only' expanded by 4.47 percent (y/y) in Q3-2023, despite the arrival of the festive season (Christmas and New Year celebrations) when consumption typically peaks (which constitutes the second consumption peak of the year, after the Ramadan-Idul Fitri consumption peak).

Considering household consumption is the most dominant component in Indonesian GDP (contributing 53.2 percent to overall GDP), a growth rate of 4.47 percent (y/y) sort of drags overall economic growth down, instead of pushing it higher.

Moreover, if we take a look at 2024, there are various challenges that loom. China's economy is expected to slow considerably, and being Indonesia's biggest trade partner, it will affect the Indonesian economy. Moreover, when demand in China is down, it will pull down global commodity prices accordingly. And considering Indonesia is quite dependent on exports (in terms of trade), it may see its export performance slide further in 2024.

Furthermore, there are other external challenges, such as geopolitical turmoil (fears of escalating wars in Gaza and Ukraine) and uncertainty over when the US Federal Reserve will start cutting its benchmark interest rate.

For an in-depth analysis of Indonesia's Q4-2023 GDP data, we refer you to our forthcoming economic update (an electronic report, PDF) that can be purchased. For more information you can contact us through:

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