Over the last 5 years, Indonesia’s GDP has grown on average by 6% per year. The table below provides the average contributions of each GDP components over this time period from the demand side.
While agreeing to the common perception that consumption is imperative to the growth of Indonesia’s economy, we can’t ignore the contribution of exports to GDP growth in the last 5 years, comprising of over half of the overall GDP percentage growth. The cooling of China and India’s economies, which accounted for 21% of Indonesia’s exports in 2011, and the fact that the US economy, which buys another 10% of Indonesia’s exports (2011), remains sluggish is no wonder that Indonesia’s exports are down 24% y/y. This has clearly put a drag on GDP growth. Having said that, with a 47% share of GDP, Indonesian exports are relatively small compared to other emerging countries in the region like Malaysia, whose exports comprise 93% of its GDP.
The size and growth of consumption is still robust, contributing 2.8 percentage points of the 6% annual GDP growth. Another area of robust growth is direct investment. FDI rose 22% in Q3 y/y to $5.9 billion, reaching US$15 billion YTD. Indonesia recorded a total of US$19.2 billion in FDI in 2011, rising 18 percent from a year earlier. For its part, DDI rose 32% y/y, albeit from a low base, reaching US$2.6 in Q3, mostly accounted for by the textile industry. We expect the level of both foreign and domestic direct investment to continue its surge into 2013.
Three sectors have dominated in terms of their contribution to economic growth over the past 5 years. The communication sector now produces approximately US$17 billion value added per year and has grown at 19% per year in the last 5 years. The wholesale and retail trade sector, reaching approximately US$41 billion per year in value added, has grown by 7% per year, facing a positive trend given the high demand for malls and shopping centers in the major urban centers.
SECTOR BY RANK OF CONTRIBUTION TO GDP GROWTH (Q3 2006 – Q3 2012)