German Vice Chancellor Praises Indonesias High Economic Growth in Southeast Asia

Berlin, INTI - Minister of Economic Affairs Coordination Airlangga Hartarto and the Vice Chancellor and Minister of Economy and Climate Action of the Federal Republic of Germany, Y.M. Robert Habeck, held bilateral meetings in Berlin, Germany (06/05). The meeting between two of the largest economies in the ASEAN and European regions discussed various collaborations in (1) Industry; (2) Trade and Investment; (3) Energy; and (4) Human Resource Development.

In his opening remarks, Minister Airlangga conveyed that in the first quarter of 2024, Indonesia managed to grow by 5.11% (YoY). This figure marks the highest first-quarter growth since 2015. The solid economic growth in the first quarter was also confirmed by various rating agencies, which provided positive assessments that Indonesia's economic resilience remains intact, supported by high and stable economic growth.

The achievement of national economic growth is also reflected in employment data (as of February 2024), which was also released today. The number of employed people increased by 3.55 million to 142.18 million compared to February 2023, while the number of unemployed decreased by 0.79 million to 7.2 million compared to February 2023. The proportion of formal workers increased to 40.83%, higher than February 2023 (39.88%), mainly driven by an increase in workers with employee status, which grew by 2.66% (YoY).

From the expenditure side, the high realization of various government spending, especially for election spending, has driven Government Consumption to grow by 19.9% (YoY). This is also reflected in the Household Final Consumption Expenditure (HFCE), which surged by 24.29% (YoY) due to election-related activities.

Moreover, Household Consumption and Gross Fixed Capital Formation (GFCF) remain the highest sources of growth, despite negative net exports. This condition indicates strong domestic demand, supported by fiscal policies as shock absorbers in responding to current global uncertainties.

With these various economic achievements, Indonesia has become one of the countries with strong and persistent growth, compared to several other countries such as Malaysia (3.9%), South Korea (3.4%), Singapore (2.7%), and Mexico (1.6%). The national economic growth is also accompanied by a low and controlled inflation rate of 3.0%, lower than several other countries such as India (4.9%), Brazil (3.9%), and the Philippines (3.7%).

Looking ahead to the remainder of 2024, the global economic outlook is estimated to continue facing uncertainty triggered by high-interest rate policies, increasing geopolitical tensions, and weakening global demand. However, based on the IMF WEO April 2024 publication, the national economy in 2024 is projected to remain resilient at around 5%, and in 2025, it will experience an increase surpassing the projection of global economic growth and the average of developing countries.

As part of efforts to maintain economic growth, the Government has outlined several strategies, ranging from maintaining purchasing power and price stability through social assistance policies, Property DTP VAT, inflation control with the 4K, maintaining external sector resilience through the optimization of natural resource revenue and strengthening the implementation of LCT, to accelerating the performance of other sectoral policies through value-added enhancements with downstreaming and accelerating the energy transition with Electric Vehicles (EV).

In the meeting in Berlin, both Ministers emphasized the importance of concluding the IEU-CEPA negotiations soon, while considering fair trade principles and prosperity. Minister Airlangga also raised issues related to the EU Deforestation Regulation (EUDR) policy, which needs to consider the aspirations of countries that still have natural forests, as well as discussions on cooperation in the development of the semiconductor ecosystem in Indonesia.