Indonesia skyline

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 2013 to 2022.
Source: Bank Indonesia.

Indonesia Government Consumption Data

2018 2019 2020 2021 2022
Government Consumption (ann. var. %) 4.8 3.3 2.1 4.2 -4.5

Economy grows at softest pace in two years in Q3

GDP growth waned to 4.9% year on year in the third quarter from 5.2% in the second quarter. Q3's reading was the softest since Q3 2021 and surprised markets on the downside. Meanwhile, the economy grew 0.8% in Q3 on a seasonally adjusted quarter-on-quarter basis, slowing marginally from Q2’s 0.9%.

Domestically, the annual deceleration was due to weaker public spending and a slightly softer expansion in private spending, which outweighed stronger fixed investment growth. Public consumption dropped at the sharpest pace since Q2 2023, contracting 3.8% due to lower expenditure on personnel, subsidies and social assistance (Q2: +10.6% yoy). Private spending increased 5.1% in the third quarter, which was below the second quarter's 5.2% expansion, as households spent less on appliances, health and education. In contrast, fixed investment growth hit an over-two-year high of 5.8% in the third quarter, up from the second quarter's 4.6%. On the external front, exports of goods and services contracted 4.3% in Q3, marking the worst reading since Q4 2020 amid downbeat goods exports (Q2: -3.0% yoy). In addition, imports of goods and services dropped at a much sharper pace of 6.2% in Q3 (Q2: -3.1% yoy), in line with softening domestic demand. As such, net exports had a marginally positive impact on total GDP growth.

The economy is seen growing at a pace similar to that of Q3 at the tail end of 2023 and expanding solidly in 2024. Election-related spending, q q recently announced additional stimulus measures—including social assistance aimed at alleviating the impact of the El Niño weather event and VAT discounts on new real estate purchases in 2024—should cushion growth. In addition, the Bank of Indonesia is expected to kick off its monetary policy loosening cycle in H2 2024, which should further stimulate domestic demand. That said, China’s underwhelming recovery and the risk of an intensifying El Niño pose downside risks to the outlook.

Krystal Tan, economist at ANZ, said GDP growth would return to its pre-pandemic average next year: “Looking ahead, we expect a pick-up in fiscal disbursement and election-related spending to help cushion against headwinds from a challenging external environment and softening consumer sentiment. […] The pass-through of Bank Indonesia’s rate hikes to the real economy will be limited by a loosening in macroprudential measures aimed at encouraging credit growth. Overall, we continue to expect full-year growth of 5% in both 2023 and 2024, which is in line with Indonesia’s pre-pandemic average.”

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 21 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.

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