World, Asia - Pacific

Indonesia’s economy grew last year despite shortfalls

Jobless rate remained low even though some economic indicators failed to hit targets

Iqbal Musyaffa  | 09.01.2020 - Update : 09.01.2020
Indonesia’s economy grew last year despite shortfalls


Indonesia’s economy grew by leaps and bounds in 2019, despite some quarterly economic indicators failing to reach their targets.

The overall growth rate of the country's economy is expected to stand at around 5% for last year.

The annual inflation rate has been under control for four years in a row, even falling to its lowest level in two decades.

During a news conference in Jakarta earlier this month, head of Central Bureau of Statistics (BPS) Suhariyanto revealed that Indonesia recorded a year on year inflation rate of 2.72% last year.

He added that inflation is very low due to government policies in controlling prices, including the supply and demand of food commodities. 

Unemployment, poverty and inequality rate hit record lows

Another remarkable accomplishment was that the unemployment rate remained low at 5.28% in August, down from 5.34% in the same period of 2018.

Suhariyanto noted that the working-age population amounted to approximately 197.91 million people in August, while the country’s total labor force had reached 133.56 million.

“Out of the 133.56 million people in the workforce, 7.05 million were classified as unemployed, while 126.51 million were employed,” he added.

Among the employed, as many as 89,96 million people work full-time, 28,41 million people are part-time workers, and 8,14 million are half unemployed.

In Indonesia, a full-time worker are those who work for about 35-40 hours a week and get a monthly salary.

From the perspective of education, Vocational High School (SMK) graduates have the highest unemployment rates.

In addition, the country has managed to reduce the poverty rate.

According to BPS data released on July 15 last year, the poverty rate in March was 9.41%, slightly better than March in 2018, when it was 9.82%.

BPS uses the average expenditure variable as a benchmark which was divided into basic food and non-food needs.

An individual is categorized as poor if he or she has expenditure below the poverty line.

Indonesia’s poverty line is calculated from the sum of the value of expenditures of minimum food needs (equal to 2,100 kilocalories) and minimum needs for housing, clothing, education and health per capita per day.

The poverty line was recorded at 425,250 rupiah per capita/month in March 2019.

It showed an increase in results compared to September 2018 which was 410,670 rupiah.

Based on the poverty line, the percentage of poor people is 9.41% or around 25 million, and the concentration of the origin of the poor population is still dominated by rural residents, even with a poverty rate benchmark of 12.85% compared to 6.89% for urban residents.

Indonesia saw another record as its inequality level in terms of expenditure among Indonesians in March, as measured by the Gini Ratio, stood at 0,382 point, the statistics bureau announced.

The point decreased very little of 0,007 points compared to March 2018 that was recorded at 0,389 point.

Despite this, income inequality in Indonesia is relatively high.

Economic growth, trade balance miss target

BPS admitted that the prolonged global trade tensions and economic slowdown of main trading partners dragged on Indonesia’s economic growth in 2019.

“Economic growth only reached 5.02% in the third quarter of 2019,” Suhariyanto said, noting that it is the lowest level in more than two years.

In comparison, economic growth in the third quarter of 2018 reached 5.17%, whereas, in the same period of 2017, it reached 5.06%.

The industrial sector was the largest contributor to economic growth during the third quarter (19.62%), followed by agriculture (13.45%) and trade (13.02%).

Meanwhile, based on expenditure, household consumption remained the primary driver of economic growth (56.52%), followed by investment (32.32%) and exports (18.75%). Moreover, Indonesia’s trade balance recorded a deficit of $3.11 billion during January to November 2019.

According to the latest data, it was the result of total exports that reached $153.11 billion while total imports reached $156.22 billion. However, the total deficit was slightly better compared to the same period of the previous year at $7.62 billion.

During January-November 2018, Indonesia’s exports reached $165.72 billion, with total imports of $173.34 billion. Indonesia has recorded a trade surplus mainly with the U.S. ($8.55 billion), India ($6.78 billion) and the Netherlands ($2 billion).

At the same time, Indonesia suffered a trade balance deficit from China ($16.96 billion), Thailand ($3.5 billion) and Australia ($2.4 billion). 

Rupiah remains stable, foreign reserves rise

The exchange rate of the rupiah against the dollar was relatively stable, Bank Indonesia announced. It strengthened to Rp13,880 per U.S. dollar.

Perry Warjiyo, governor of Bank Indonesia, the country's central bank, said the rupiah became the second strongest Asian currency among its neighbors after Thailand as it experienced an appreciation of 2.68%.

“The rupiah’s strong performance was supported by foreign capital inflow in portfolio investment,” Warjiyo said, adding of total foreign capital inflow in 2019 reached Rp224,24 trillion (US$16 billion).

The foreign capital portfolios entering Indonesia were embedded in government securities worth Rp168.6 trillion (US$12 billion), corporate bonds worth Rp3 trillion (US$214 million), Bank Indonesia certificates worth Rp2,6 trillion and Rp50 trillion in shares.

Bank Indonesia also revealed that forex reserves stood at $129,18 billion by the end of 2019, a 7% increase from the previous year's forex reserves of $120,6 billion.

It was equivalent to finance of 7.6 months of imports or 7.3 months of imports and the government’s external debt and way above the international adequacy standard of three months imports.

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