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Earlier this month Indonesia reported its 2022 GDP growth, which was the highest in the past nine years as household consumption rose. Indonesia’s consumer spending makes up over half of the country’s GDP, and in a recent event, President Joko Widodo (Jokowi) urged Indonesians to increase their expenses to support the economy.
“The government must encourage the public to spend as much as possible to boost our economic growth,” Jokowi said, the second time in recent years that the leader has called on his countryfolks to revive spending that had slowed during the pandemic.
Jokowi on Indonesia consumer spending
Talking about the spending patterns in Southeast Asia’s largest economy, President Jokowi said that about 690 tn rupiah (~$45.4 bn) was in savings accounts of the people as they had curtailed spending in 2022. The leader called on governors of state to push Indonesians to go out and spend more.
“They don’t want to shop, don’t want to come to restaurants, don’t want to come to markets, don’t want to come to malls — no, better keep it in the bank,” Jokowi said.
Additionally, the president has ordered the country’s police to issue permissions to public events for wider publicity, as over 3,000 sports and other events are scheduled to take place in Indonesia this year. Among other things, Jokowi urged the local government to attract more tourists while adding that small businesses should be set up at tourist hotspots so that people spend.
Indonesia saw 5.31% GDP growth in 2022. “The source of growth from the expenditure side is household consumption,” Margo Yuwono, head of Statistics Indonesia, had said. “The improvement in income boosted consumption in the transport, communication, and restaurant-hotel sectors.”
However, the economic growth is expected to cool as inflation and interest rate hikes bit into the wallets of the consumer, whereas the global economic slowdown may impact the country’s exports.
In its January report, the International Monetary Fund (IMF) projected Indonesia’s GDP to grow at 4.8% in 2023, whereas the government expects a 5.3% growth. The Southeast Asian economy recorded an inflation rate of 5.28% YOY in January 2023, easing from the inflation of 5.51% in December 2022.
Meanwhile, Bank Indonesia’s January 2023 consumer survey found that Indonesia consumer confidence index had risen to 123, up 3.1 points over December when the consumer confidence was at 119.9. Separately, household spending in Indonesia grew 5.39% in 2022.
On the other hand, China’s reopening could support the Indonesian economy. A report published by India-based content and marketing firm InMobi found that the upcoming Ramadan festivities may trigger higher spending by Indonesians.
“60% of Indonesians plan to spend over 3m rupiah (~$200) this year. This is an extremely significant rise, as this number stood at only 28% in 2022…1 out of 3 women are willing to spend more than 5m rupiah (~$330) showcasing a slightly higher propensity than men to spend on Ramadan in 2022,” as per InMobi.
