Household Consumption Supports Indonesia's Economy in Q2 2023: Contributing Factors

The Central Statistics Agency (BPS) recorded that household consumption was the main driver of Indonesia's economic growth in the second quarter of 2023. Economic growth currently reached 5.17% year-on-year (yoy).

Household consumption contributed the majority, or 53.31%, of Indonesia's total Gross Domestic Product (GDP) growth in the second quarter of 2023. This component grew by 5.32% yoy.

BPS Deputy for Balance and Statistical Analysis, Moh. Edy Mahmud, stated that several factors drove household consumption growth in the second quarter of 2023. These include religious holidays, Ramadan and Eid al-Fitr, accompanied by the payment of religious holiday allowances (THR).

"In terms of purchasing power, there was an increase in (public) income from THR and the 13th-month salary paid in the second quarter of 2023," said Edy in an online press conference on the BPS YouTube channel, Monday (7/8/2023).

Furthermore, the increase in public mobility during the religious and school holidays also boosted household consumption.

"Household consumption groups that experienced significant growth include transportation and communication, clothing, footwear and their maintenance services, and restaurants and hotels," said Edy.

Besides household consumption growth, another component contributing to economic growth in the second quarter of 2023 was gross fixed capital formation (PMTB) or investment. This component grew by 4.63% yoy, contributing 27.90% to the second quarter of 2023 GDP.

Government consumption in the second quarter of 2023 also contributed positively to Indonesia's economic growth, growing by 10.52% yoy, with a contribution of 7.51% to the GDP.

Then, the growth of Non-Profit Institutions Serving Households (LNPRT) consumption was recorded at 8.62% yoy, with a contribution of 1.24%.

On the other hand, Indonesia's foreign trade recorded negative growth. According to Edy, both exports and imports still grew significantly in the first quarter of 2023.

"The foreign trade component experienced a contraction of 2.75% (yoy) for export activities, while 3.08% (yoy) for import activities," said Edy.

Nevertheless, the export component contributed 20.25% to Indonesia's economy in the second quarter of 2023. Meanwhile, the import component contracted by 18.54% of Indonesia's GDP.