Economic Growth Dynamics in Indonesia: The Interplay of Inflation, Population Growth, and Foreign Direct Investment
DOI:
https://doi.org/10.55927/ijsmr.v3i12.842Keywords:
Economic Growth, Inflation, Population Growth, Foreign Direct Investment (FDI)Abstract
The objective of this research is to analyze the effects of inflation, population growth, and foreign direct investment (FDI) on Indonesia’s economic growth during the period 1993–2023. Annual time-series data obtained from international sources, including the World Development Indicators (World Bank), are analyzed using a multiple linear regression model. The results reveal that FDI has no statistically significant impact on economic growth, reflecting weak integration with domestic industries, limited absorptive capacity, and a strong concentration in extractive sectors. In contrast, population growth exerts a positive and significant influence on economic growth through labor force expansion, increased domestic demand, and capital accumulation. Inflation is found to significantly hinder economic growth by increasing macroeconomic uncertainty, reducing investment, and weakening productivity. These findings emphasize the importance of strengthening domestic linkages to enhance the growth impact of FDI, optimizing the demographic dividend through investments in education and skills, and maintaining price stability via credible monetary policy and effective fiscal–monetary coordination to ensure sustainable long-term economic growth.
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