Indonesia’s Economic Growth Beats Forecasts in Q2

 

Indonesia’s economy grew by 5.17 percent in the second quarter of 2023, beating analyst expectations thanks to higher government and household spending, data from Statistics Indonesia showed on 7 August.   

The economic growth in the largest economy in the ASEAN region exceeded the 4.93 percent growth anticipated by economists polled by Reuters and was the strongest growth in three quarters.

Compared to the first quarter, Indonesia’s GDP rose by 3.86 percent, the data showed.

The group of provinces on Jawa Island is the main contributor to the Indonesian economy, with a share of 57.27 percent, and recorded a growth rate of 5.18 percent year over year.

“Second-quarter GDP managed to beat expectations thanks to robust consumption and a solid uptick in government outlays,” Nicholas Mapa, a senior economist at ING, wrote, commenting on Indonesia’s economic growth.

“Growth was delivered by robust domestic consumption (5.2%YoY) and a punchy 10.6%YoY increase in government outlays. Household spending benefited from moderating inflation, with that possibly coming back to target as early as May. Strong household spending and government outlays helped offset the challenges on the external front as exports fell 2.8%YoY,” Mapa added.

The surprise to the upside in the second-quarter GDP has the Indonesian economy on track to achieve the yearly growth target of 5.0-5.3 percent, the economist noted.

“With inflation softening further, we can expect household spending to offset soft export growth in the coming months. Meanwhile, increased economic activity ahead of the February 2024 election could also offset the slowing of capital formation, which appears to be weighed down by Bank Indonesia’s recent rate hike cycle.”