Dynamics of Economic Growth and Investment Patterns in East Java: A Flow of Funds Perspective, 2019-2024

Abstract

East Java plays a strategic role in Indonesia’s economy, yet the period 2019 to 2024 was marked by significant economic disruption and recovery. This study aims to analyze the dynamics of economic growth, examine changes in investment patterns through Gross Fixed Capital Formation (GFCF), Domestic Direct Investment (DDI), and Foreign Direct Investment (FDI), and interpret the investment financing mechanism using the Flow of Funds Account (FFA) framework. The study employs a descriptive quantitative approach using secondary time series data from Statistics Indonesia and the Ministry of Investment for the period 2019 to 2024. The analysis combines trend analysis and comparative phase analysis across three phases: pre-pandemic, contraction and transition, and recovery and normalization. The results show that economic growth contracted to -2.33% in 2020 and gradually recovered to 4.93% in 2024. Investment dynamics indicate that GFCF experienced a decline during the contraction phase but recovered gradually, with its share remaining relatively stable at around 27 to 28 percent of GRDP. In terms of composition, DDI increased consistently from IDR 45.45 trillion in 2019 to IDR 92.41 trillion in 2024, while FDI showed a more fluctuating pattern. The interpretation using the FFA framework indicates that investment dynamics can be interpreted as closely related to the structure of financing, particularly the interaction between savings, investment, and net lending or borrowing across sectors. The findings suggest that changes in investment do not immediately translate into economic growth and are influenced by the underlying financing mechanism. This study highlights the importance of an integrated approach that considers output, investment, and financing simultaneously in understanding regional economic dynamics.