Pursuing Indonesia's 8 Percent Economic Growth Leap

President Prabowo Subianto has set a target for Indonesia's economic growth to reach 8% within five years of his presidency, namely the 2025-2029 period.

This is an ambitious target. Since the COVID-19 pandemic in 2020, Indonesia's economy has historically only grown in the range of 5%, as shown in the graph.

Despite the ambitious nature of the target, the government is quite optimistic about achieving it. This optimism was expressed, among others, by Coordinating Minister for the Economy Airlangga Hartarto at the National Coordination Meeting of the Central and Regional Governments at the end of last year.

"If President Prabowo asks us to grow by 8 percent, it is possible, because we have achieved that before," said Airlangga, as reported by the Ministry of Finance website (11/11/2024).

Indonesia's economy did indeed grow by 8.2% in 1995. According to the Ministry of Finance, this growth was driven by several key sectors, including the manufacturing or downstream sector, the automotive industry, construction, services, and investment.

Airlangga believes that manufacturing or downstream processing can again be the sector driving the achievement of the economic target in 2029.

"What we must push is that the consumption sector must be maintained, investment must grow by around 10 percent, and exports must grow by 9 percent, and the sectors remain in downstream processing, the service sector, tourism, construction and housing, the digital economy, the development of new economies such as semiconductors, and the energy transition," said Airlangga.

However, based on data to date, the manufacturing sector does not seem to be able to become the locomotive driving Indonesia's economy.

This is reflected, among other things, in the growth rate of the manufacturing industry, which has consistently been lower than the national GDP growth in recent years.

The contribution of the manufacturing industry to national GDP has also been declining over the last two decades.