Airlangga Hartarto unveils government strategy to secure 8% economic growth
JAKARTA – Coordinating Minister for Economic Affairs, Airlangga Hartarto, revealed several strategies that the Indonesian government is preparing to accelerate economic growth to 8% over the next five years.
Airlangga recently referred to a report by the Organization for Economic Cooperation and Development (OECD) on Indonesia's economic outlook, which projects that economic growth will reach 5.1% in 2024 and 5.2% in 2025.
The government is optimistic about exceeding these figures by maintaining inflation at a manageable level. "Recently, the President attended a meeting with governors across Indonesia, where inflation was reduced to 1.7% and even 1.5%," said Airlangga during the Bisnis Indonesia Economy Outlook 2025 event today.
In addition, the government is aiming to boost consumer spending in the fourth quarter (Q4) of this year. Initiatives such as the National Shopping Day (Harbolnas) and tourism promotions through lower domestic airfare are designed to stimulate retail spending. Retail sales grew by 1.7% year-on-year (yoy) to IDR 256.5 trillion in Q3 2024. Furthermore, the Consumer Confidence Index (CCI) in November remained at an optimistic level of 125.9.
Despite this optimism, Airlangga noted that Indonesia still faces several challenges. One such challenge is the Incremental Capital Output Ratio (ICOR), which measures the amount of additional investment required to increase output. Currently, Indonesia's ICOR stands at 6.5%, while investment contributes 30.5% to GDP.
"If we can lower the ICOR to at least 5%, our economic growth can surpass 6%. If we bring ICOR down to 4 and increase investment to 32%, achieving 8% growth is feasible," Airlangga explained.
To boost domestic investment, Airlangga highlighted that the government has developed several Special Economic Zones (KEK). This aligns with the successful initiatives of other ASEAN countries, such as China and Vietnam, which have used SEZs to stimulate investment.
"In recent years, we have developed 24 SEZs, attracting around IDR 242.5 trillion in investment. These zones have created jobs for 151,260 people and are home to 394 businesses," Airlangga concluded. (KR/ZH)
