Tomorrow it will be announced, Jokowi's last legacy for Prabowo

Jakarta, CNBC Indonesia– Indonesia's economic growth is expected to slow slightly in the third quarter of 2024 due to weakening purchasing power and consumption of the population as well as the absence of religious holidays.

The Central Statistics Agency (BPS) will release economic growth data for the third quarter of 2024 on Tuesday (05/11/2024). For the record, economic growth for the third quarter of 2024 is the latest gross domestic product (GDP) data of the era of President Joko Widodo. The economic growth of this third quarter is Jokowi's latest legacy, which has become the economic foundation of President Prabowo Wubianto.

Market Consensus Reunited CNBC Indonesia out of 15 institutions estimate that economic growth will reach 5.03% (year over year/yoy) and 1.58% (quarter to quarter/qtq) in the third quarter or July-September 2024.

For the record, the Indonesian economy grew by 5.05 (year-on-year) and 3.79 percent (quarter-on-quarter) in the second quarter of 2024. Meanwhile, the Indonesian economy grew by 4.94 % (year-on-year) and 1.60% (quarter-on-quarter) in the third quarter of 2023.

The poll results are more pessimistic compared to the projections of Finance Minister Sri Mulyani Indrawati, who estimates that Indonesia's economic growth in the third quarter of 2024 will still increase to 5.06 percent.

Historically, growth in the third quarter is usually lower than in the second quarter because people start to curb their spending. Additionally, there will be no religious celebrations or major events between July and September 2024. Two Eids, namely Eid al-Fitr and Eid al-Adha, will take place this year between April and June.
Meanwhile, general elections will be held in the first quarter of 2024.

A slowdown in consumption?

Concerns about weakening purchasing power are haunting economic performance in the third quarter of this year.
Throughout the third quarter of 2024, the consumer price index (CPI) even fell or continued to experience deflation (month to month/mtm) continuously. This phenomenon has not been observed since the Covid-19 pandemic in 2020.

Additionally, the Manufacturing PMI also saw a contraction throughout the third quarter of 2024.

This slowdown in consumption has been reflected in a number of indicators ranging from deflation to a weakening consumer confidence index to car sales.

Coordinating Minister for the Economy Airlangga Hartarto admitted that the Purchasing Managers' Index (PMI) of Indonesia's manufacturing sector in July-October 2024 was still declining, indicating a contraction or decline in activity in due to the conditions of people's purchasing power which affected demand.

“We see that from a national point of view, there is a weakening of consumers,” he told the media at the Office of the Coordinating Ministry of Economy, Friday (01/11/2024).

Data from Bank Indonesia also shows that the consumer confidence index continues to decline, from around 125 at the start of the year to just 123 in September 2024.
The weakening of the index is mainly due to the population's pessimism regarding employment conditions.
The job availability index fell to 131.1 in September 2024, its lowest record so far this year.

Data from S&P Global also showed that business confidence is now at a four-month low and below historic levels.

The slowdown in business is pushing companies to reduce the number of workers in their factories. This is the third time in the last four months that the company has reduced its workforce.

Data on weakening consumption, especially for the middle class, is also reflected in weak car sales.
Data from the Indonesian Automobile Industries Association (Gaikindo) shows that car sales reached only 223,200 in the third quarter of 2024, a decrease of 10.5% compared to the same period last year .

In contrast, motorcycle sales jumped 11% to 1.7 million in the third quarter of 2024. This data difference could reflect a decline in class in Indonesian society.

For the record, consumption contributes 53-56% to the total gross domestic product (GDP), so the rate of consumption will greatly determine Indonesia's economic growth.

Along with consumption, the pace of investment is also starting to slow down. Data from the Investment Coordination Board (BKPM) shows that investment realization during the third quarter of 2024 reached IDR 431.48 trillion, an increase of 15.24% compared to the same period of the previous year .

This growth achieved is much lower compared to the third quarter of 2023 (21.6%) or the third quarter of 2022 (42.1%).

The chief economist of Bank Permata, Josua Pardede, believes that investments in construction are expected to slow down, as indicated by cement sales in the third quarter of 2024 which recorded a growth of 1.1% (yoy annual), well below the third quarter of 2023 which had reached 6.8%. .

Another engine of growth lies in exports which have recorded better performance. The value of Indonesian exports between July and September 2024 increased by 6.5 percent to US$67.8 billion. The increase in exports was mainly supported by the improvement in crude palm oil (CPO) price, which increased by 3% (y-o-y) to MYR 3,946/tonne.

Imports also increased by 9.7% in the third quarter of 2024 to reach US$61.3 billion.

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