Can Indonesia Achieve an Economic Growth Target of 8% by 2028? Government's Vision and Strategies Explained

Jakarta, INTI - The Indonesian government has set an ambitious goal of reaching an economic growth rate of 8% by the year 2028-2029. This target is reminiscent of Indonesia’s past economic performance, particularly in 1995, when the nation achieved a growth rate of 8.2%. That success was largely attributed to key sectors like manufacturing, automotive, construction, services, and investments. Now, the government is optimistic about reaching this benchmark again by fostering similar growth across various vital industries.

Coordinating Minister for Economic Affairs Airlangga Hartarto has affirmed that achieving an 8% growth rate is possible, noting Indonesia’s previous success. “The President requested we aim for 8% growth, which is achievable as we’ve attained this before. Therefore, we must maintain consumer spending, ensure investments grow by around 10%, and boost exports by 9%," Minister Airlangga explained during the National Coordination Meeting between the Central and Regional Governments, held in Sentul, Bogor, Central Java on Thursday (7/11). This conference, themed "Implementing Asta Cita Towards a Golden Indonesia 2045," highlighted the roadmap to achieve the nation’s long-term economic goals.

To realize this vision, the government has pinpointed certain focus areas: maintaining consumption, bolstering investments, enhancing exports, and prioritizing specific sectors, including downstream manufacturing, services, tourism, construction, housing, digital economy, and emerging economies such as semiconductors and renewable energy. Minister Airlangga highlighted President Joko Widodo’s vision for Indonesia to become a leading producer of green energy, which could significantly contribute to the national economy and global sustainability efforts.

Indonesia’s Current Economic Growth and Regional Contributions

The Central Statistics Agency (BPS) recently reported that Indonesia’s economy grew by 4.95% year-on-year in the third quarter of 2024 or 5.03% quarter-to-quarter. Java continues to be the primary economic contributor, accounting for 56.84% of national GDP, with the main growth drivers being the manufacturing, trade, and construction sectors. Other regions also showed strong performance; for instance, Papua Barat and Central Sulawesi recorded impressive growth rates of 19.56% and 9.08%, respectively, driven by advancements in processing and mining industries.

Minister Airlangga stated, “This demonstrates that through industrialization and downstream processing, we can advance our economy. It is also what gives the President confidence that an 8% growth rate is attainable."

Fifteen provinces, representing 26.7% of Indonesia’s GDP, exceeded the national growth rate during the third quarter of 2024. These statistics suggest that growth is achievable if other provinces continue to focus on sectors like processing industries, mining, and other core economic pillars. However, challenges remain. Disparities in per capita income across regions are significant; for example, the top 10 districts with the highest per capita GDP average USD 33,267, while the lowest 10 districts average USD 658. Besides high per capita GDP, regions must ensure quality growth, encompassing low poverty rates and balanced Gini ratios.

Maintaining Stability Amid Inflation and Key National Events

Regional governments play an essential role in stabilizing the national economy, particularly in controlling inflation. To keep overall inflation in check for 2024, local governments are advised to maintain food-related inflation below 5% and prepare for potential price hikes due to seasonal events like Christmas and New Year. These measures are critical to sustaining the purchasing power of citizens and ensuring economic stability in the face of inflationary pressures.

Long-Term Strategies for Sustainable Growth

Minister Airlangga outlined several policy strategies to foster sustainable growth, emphasizing the importance of downstream processing of natural resources, efficient infrastructure utilization, increased connectivity, and expanding workforce training opportunities. He encouraged local governments to implement upskilling and reskilling programs tailored to the needs of industrial and economic zones. Minister Airlangga also stressed the importance of managing inflation ahead of national holidays and urged local leaders to support the government’s microcredit program, which is pivotal for empowering small and medium-sized enterprises (SMEs).

“In preparation for upcoming national holidays, inflation management is crucial,” said Airlangga. “I urge local leaders, governors, and regents to encourage their SMEs to take advantage of the government’s microcredit programs to strengthen their capacities.”