By Stefanno Sulaiman and Gayatri Suroyo
JAKARTA (Reuters) – Indonesia’s economy grew 5.03% in 2024, roughly similar to the previous year’s rate and in line with expectations, but the pace was the slowest in three years, official data showed on Wednesday, raising hopes of further stimulus measures.
Growth in Southeast Asia’s largest economy has hovered around 5% since the COVID-19 pandemic, a solid pace but far behind new President Prabowo Subianto’s target of 8% within his term until 2029. In 2023, growth was 5.05%.
Analysts pointed to several positive growth catalysts, including the central bank’s rate cuts of 50 basis points since September and government incentives such as property tax cuts and a higher minimum wage.
Last year, economic growth was propped up by spending for political campaigns and elections as well as rising investment, which offset shrinking net exports, Statistics Indonesia data showed. Investment growth in 2024, at 4.61% year-on-year, was the highest in six years.
But the re-escalation of global trade disputes presents a challenge in coming years, heightening business uncertainty.
Bank Indonesia (BI) last month cited the prospect of U.S. tariffs disrupting trade and weakening global demand when it downgraded its 2025 growth forecast to a range of 4.7%-5.5% from 4.8%-5.6%.
“As weaker-than-expected car sales have shown the sluggish demand for durable goods, BI will likely consider more rate cuts to support the economy,” said SMBC economist Ryota Abe, noting it would also focus on trying to keep the rupiah currency stable against the U.S. dollar.
“I expect the bank to cut (rates) one more time to support the economy in 2025 and the GDP growth rate for 2025 will be 5.1%,” Abe said, adding growth could be higher if BI’s easing is more aggressive.
Also expected to support growth is Prabowo’s signature free meals programme, which will spur activity in the food and transportation sectors, said Myrdal Gunarto, Maybank Indonesia economist, who expects 5.15% GDP growth in 2025.
The programme, intended to reach nearly 83 million children and pregnant women across the country, began in January.
Since the start of 2025, Prabowo’s administration has also launched programmes the government believes would boost growth, including providing electricity tariff discounts to bolster purchasing power and building affordable housing.
However, Prabowo has slashed the infrastructure budget for 2025. Construction of toll roads and dams contributed to growth last year, as former President Joko Widodo accelerated projects ahead of Prabowo’s October inauguration.
In the fourth quarter, GDP grew 5.02% annually, close to the 4.98% median forecast of analysts polled by Reuters and little changed from the 4.95% pace in the third quarter.
Household consumption, which makes up over half of GDP, grew 4.98% on-year amid holiday spending, up a touch from a 4.91% growth in the previous quarter.
Investment expanded 5.03% on-year in the October-December quarter, compared with 5.15% growth in the previous three months.
On a non-seasonally adjusted basis, GDP rose 0.53% in the fourth quarter from July-September.
(Reporting by Gayatri Suroyo, Stefanno Sulaiman and Fransiska Nangoy; Editing by John Mair and Kim Coghill)
