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Indonesia Government Consumption

Indonesia Government Consumption

Government Consumption in Indonesia

The economy of Indonesia recorded an average growth rate of 2.5% in government consumption in the decade leading to 2022. In 2022, government consumption growth was -4.5%.

Indonesia Government Consumption Chart

Note: This chart displays Government Consumption (ann. var. %) for Indonesia from 2015 to 2014.
Source: Macrobond.

Indonesia Government Consumption Data

2019 2020 2021 2022 2023
Government Consumption (ann. var. %) 3.3 2.1 4.3 -4.5 2.9

Public spending spree boosts GDP growth in Q1 2024

GDP growth ticked up to 5.1% year on year in the first quarter from 5.0% in the fourth quarter of last year. The acceleration was driven by stronger household spending and the quickest expansion in government consumption in over a decade.Q1's reading marked the best result since Q2 2023 and beat market expectations.

Private consumption growth rose to 4.9% year on year in Q1 compared to a 4.5% expansion in Q4, with Ramadan—more of which fell in Q1 during 2024 compared to last year—likely providing a boost to spending. Moreover, government spending picked up to a 19.9% increase in Q1 (Q4 2023: +2.8% yoy) due to February’s general election, accelerating public construction projects and increased social spending in light of the El Niño weather event. Less positively, fixed investment growth waned to 3.8% in Q1 from 5.0% in the prior quarter. In addition, on the external front, exports of goods and services growth moderated to 0.5% in Q1 (Q4 2023: +1.6% yoy). Conversely, imports of goods and services rebounded, growing 1.8% in Q1 (Q4 2023: -0.1% yoy), marking the strongest reading since Q1 2023.

During the remainder of 2024, GDP growth will hover near Q1’s level. Investment spending should catalyze growth as political uncertainty subsides and interest rates abroad gradually decline. Moreover, exports are seen accelerating ahead on an upturn in the global electronics sector and a recovery in tourism demand from the rest of ASEAN and China. That said, rising inflation will cap overall economic growth.

United Overseas Bank analysts Enrico Tanuwidjaja and Agus Santoso commented on the outlook: “Upbeat economic growth in 1Q24 indicates that improvement is likely to extend into the remaining quarters of the year, underpinned by rebounding domestic consumption, supported by fiscal expansion and investment. We maintain our forecast for the Indonesian economy to grow by 5.20% this year. Nevertheless, higher for longer interest rates are likely to restrain domestic demand until there are signs of easing BI rate eventually come. In addition, external risks could also pose some headwinds for growth.” ING analyst Nicholas Mapa pointed out factors that would weigh on growth: “In the near term, we see looming headwinds that could sap some momentum from the economy. Price pressures picked up modestly in 2024 due to higher food and energy prices, which could limit the purchasing power of households until price pressures ease. Meanwhile, capital formation, which managed only a modest 3.8%YoY gain, will continue to be challenged after Bank Indonesia hiked policy rates last month to 6.25%. Focus will shift to president-elect Prabowo Subianto taking over later in the year with particular focus on his expenditure plans.”

Consensus Forecasts and Projections for the next ten years

How should you choose a forecaster if some are too optimistic while others are too pessimistic? FocusEconomics collects Indonesian government consumption projections for the next ten years from a panel of 19 analysts at the leading national, regional and global forecast institutions. These projections are then validated by our in-house team of economists and data analysts and averaged to provide one Consensus Forecast you can rely on for each indicator. By averaging all forecasts, upside and downside forecasting errors tend to cancel each other out, leading to the most reliable government consumption forecast available for Indonesian government consumption.

Download one of our sample reports to visualize what a Consensus Forecast is and see our Indonesian government consumption projections.

Want to get access to the full dataset of Indonesian government consumption forecasts? Send an email to info@focus-economics.com.

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