Indonesia’s Q2 GDP growth strongest in three quarters

JAKARTA - Indonesia’s economic growth in the second quarter accelerated unexpectedly to its highest rate in three quarters, shored up by strong household and government spending and despite its exports weakening amid falling commodity prices.

South-east Asia’s biggest economy expanded 5.17 per cent in the April-June quarter from the same period a year earlier, faster than the 4.93 per cent growth predicted by economists polled by Reuters.

First-quarter growth was revised up slightly, to 5.04 per cent.

On a quarterly, non-seasonally adjusted basis, gross domestic product (GDP) expanded 3.86 per cent, compared with the poll’s prediction of 3.72 per cent growth.

Indonesia’s post-pandemic recovery received a boost from a commodities-led export boom in 2022, but analysts expect momentum to cool as prices for its top products, such as palm oil and coal, fall and global demand weakens with interest rate hikes in many countries.

Indonesia’s own monetary tightening of 225 basis points from August 2022 to January 2023 was also seen hurting domestic demand.

But household consumption, which makes up more than half of GDP, expanded 5.23 per cent on a yearly basis in the last quarter, the quickest pace since the third quarter of 2022. That was due to rising household spending for the Muslim fasting month and Eid al-Fitr festivities in late April and the June school holidays, the statistics bureau said.

Growth in investment and government spending also more than doubled, to 4.63 per cent and 10.62 per cent, respectively.

Meanwhile, exports contracted 2.75 per cent in the second quarter on a yearly basis, in stark contrast to last quarter’s growth of more than 10 per cent.

Last year’s growth was 5.3 per cent, a nine-year high. The government is targeting the same growth rate for 2023.

The central bank predicts GDP will expand in a range of 4.5 per cent to 5.3 per cent in 2023. REUTERS