2024 Economic Outlook for Indonesia

Indonesia’s economic outlook for 2024 looks positive. The government is committed to fostering a robust business environment, and key indicators and strategic initiatives are expected to drive economic development.

What is the Outlook for Indonesia in 2024?

The economic outlook for 2024 is anticipated to unfold in two distinct scenarios—initial challenges followed by a more favorable landscape towards the end. In Indonesia, economic acceleration is expected to materialize as the government’s transitional processes conclude by the year-end.

According to Bank Indonesia’s projections, Indonesia’s GDP growth is estimated to range between 4.7% and 5.5% in 2024, with inflation hovering around 2.5%±1%. 

Furthermore, the e-commerce sector is poised to maintain its growth trajectory, with a projected increase of 2.8% to reach IDR 487 trillion in 2024 and 3.3% to reach IDR 503 trillion in 2025. Secure, seamless, and reliable payment systems underpin the robust performance of digital economic and financial transactions. 

The value of digital banking transactions is anticipated to grow by 23.2% in 2024, reaching IDR 71,584 trillion, and by 18.8% in 2025, corresponding to IDR 85,044 trillion.

What are the Economic Challenges in 2024?

Following the post-Covid-19 pandemic era, there is a trend of global and national economic recovery. However, Indonesia’s economy in 2024 is suspected to face uncertainty influenced by several external and internal factors.

Several external factors are contributing to Indonesia’s economic uncertainty. These factors include events such as conflicts between Israel and Palestine and Russia and Ukraine, along with the threat of climate change that could disrupt food supply chains. 

Furthermore, inflation, interest rate hikes, and economic slowdowns in China, Europe, and the United States are also expected to impact global economic growth. At the domestic level, Indonesia may face several anticipated challenges in its macroeconomic landscape in 2024. 

These challenges include export slowdowns, domestic interest rate hikes, depreciation of the rupiah exchange rate, and the upcoming general election.

Opportunities to Capitalize on Indonesia’s Economy in 2024 

Despite the challenges, there are plentiful opportunities for businesses to capitalize in 2024; those are:

1. Environmental, Social, and Governance (ESG)

In 2024, there is a chance to enhance ESG (Environmental, Social, and Governance) initiatives. A good ESG rating can help companies secure more extensive funding at lower interest rates, resulting in higher brand recognition and keeping employees and consumers loyal.

2. Renewable Energy Sources and Waste Management

Indonesia has great potential for renewable energy sources such as geothermal, hydro, and solar. A projected annual investment of USD 10 billion in energy efficiency by 2030 indicates a shift from traditional and polluting electricity generation methods such as coal. 

Additionally, Indonesia is a significant plastic waste producer, resulting in water pollution concerns. However, startups and initiatives are working towards addressing these issues through innovative solutions.

3. Tourism

Indonesia’s Minister of Tourism and Creative Economy, Sandiaga Uno, is optimistic about the country’s tourism sector in the upcoming year. He predicts that the industry will perform better than in 2023, although it still has a long way to go to return to pre-COVID-19 levels in 2019. 

In 2023, Indonesia saw about 11 million foreign tourist visits, which exceeded the target of 8.5 million. The government’s goal for 2024 is to have 14 million foreign tourists visiting the country.

4. Financial Technology and E-Commerce

Indonesia’s financial technology (fintech) sector is well-funded, with about half of 2020’s venture capital investments in payment startups. With over 300 fintech startups, the growth potential is substantial, especially given the popularity of cash transactions and that only half of the population has a financial institution account.

5. Transportation

Indonesia comprises over 17,000 islands, which poses logistical issues for businesses looking to optimize transportation expenses. However, this also creates opportunities for companies to find ways to cut costs. 

The demand for electric vehicles is projected to increase significantly, with an estimated 21 million EVs on the road by 2025. The Indonesian government is committed to supporting this sector with a proposed USD 2 billion EV fund to cater to the country’s various transportation needs.

6. Education Technology

Despite having numerous students and educational institutions, Indonesia has a significant gap in upper secondary qualifications, with 42% of 25- to 34-year-olds falling short. 

This creates an opportunity in education technology, with estimates suggesting that 113 million Indonesians will need professional retraining by 2030. Entrepreneurs can explore comprehensive courses, online tutoring, or self-learning options to meet this growing demand.

7. Halal Industry

Indonesia is a country where most of the population is Muslim. Due to this, there is a considerable demand for halal products and services. Indonesia has established itself as a significant market for halal goods, and its expertise in areas such as Islamic banking, fintech, and halal goods manufacturing puts it in a favorable position to become a leader in the halal industry.

8. Healthcare

Universal healthcare was implemented in Indonesia in 2014, making quality healthcare a top priority for the nation. This program covers around 86% of the population, providing greater access to medical care and creating opportunities for growth in the medical industry. 

However, persistent challenges remain, such as a shortage of healthcare providers and unequal care distribution. The COVID-19 pandemic has led to the adoption of telemedicine, which is especially vital for reaching remote areas. This presents investment potential for digital healthcare.

Policy Initiatives to Support Economic Growth

Several policy reforms aim to address structural issues in Indonesia’s economy and support economic growth:

1. Infrastructure Development

The first focuses on extensive infrastructure development, enhancing connectivity mobility, and reducing transportation costs to stimulate new growth areas.

2. Institutional and Regulatory Reforms

Equally crucial is the second step, which involves reforms in institutions, regulations, and legal frameworks. These reforms will provide clarity for economic activities and foster future investments. 

Notable reforms include the Job Creation Law to promote investment and streamline policies. Moreover, the omnibus law on the financial sector aims to strengthen institutional authority, build public trust, and enhance financial literacy and innovation.

3. Human Resources Enhancement

Another vital reform emphasizes building and improving the quality and productivity of human resources through increased budgets for education and infrastructure in the coming years.

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Unlock Business Growth in 2024 with InCorp Indonesia

Despite the ongoing global economic challenges, Indonesia is an attractive destination for businesses looking for sustainable growth and expansion. The country’s domestic consumption is strong, the digital economy is growing, and there is a strategic focus on attracting foreign investment. 

However, navigating the dynamic local landscape requires careful planning and a thorough understanding of regulations. InCorp Indonesia is a trusted corporate solutions provider that offers comprehensive services to help establish your business in Indonesia. These services include company registration, business licensing, and product registration. 

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