Indonesia’s economy accelerated last quarter as the nation benefited from strong domestic consumption, even as exports took a knock from slowing global demand.
(Bloomberg) — Indonesia’s economy accelerated last quarter as the nation benefited from strong domestic consumption, even as exports took a knock from slowing global demand.
Gross domestic product rose 5.03% in the three months through March from a year ago, the statistics office said on Friday. That was faster than the median estimate of 4.97% in a Bloomberg survey of economists.
Compared to the three months ended December, the economy shrank 0.92% in the first quarter, still better than the economists’ median estimate for a 1% contraction. This dip follows the seasonal pattern over the years, the nation’s statistics agency said Friday.
The Indonesian rupiah was steady at 14,682 per dollar after the release, while the benchmark Jakarta Composite Index remained nearly 1% lower.
As slowing global demand saps exports that make up about a quarter of Southeast Asia’s largest economy, focus will turn to domestic consumption to shore up expansion. The Eid al-Fitr celebrations last month should help boost demand further, based on strong retail sales and improved consumer confidence.
Private consumption grew 4.54% last quarter, accelerating slightly from 4.48% in the previous three-month period. It remains the largest contributor to Indonesia’s economic output, though its share has fallen to about half of GDP from close to 60% in 2020, latest data showed.
Room for Rate Cut
Bank Indonesia has already halted its monetary policy tightening after price pressures eased from a seven-year high. With the headline inflation rate looking set to return within the central bank’s 2%-4% target band sooner than expected, some analysts see room for an extended pause or even rate cuts that could bolster growth.
Meanwhile, exports expanded 11.68% in the first quarter, a much slower pace than the near-15% it recorded in the three months to December. Resource-rich Indonesia saw lower prices for coal, palm oil, crude oil and nickel as the global commodity boom recedes.
According to Satria Sambijantoro, economist at PT Bahana Sekuritas, outbound shipments could suffer a sharper pullback in the coming quarters as exporters tend to frontload orders in the year. Demand is also weakening amid rising recession risks in the US and Europe.
Indonesia’s economy should have strong catalysts, though, from 2024 election-related spending that could both support domestic consumption and lure offshore funds that will strengthen the rupiah, Sambijantoro said.
“Overall, Indonesia’s macro picture in 2023 appears resilient amid stagflation risks elsewhere, and there is hope for rebound in consumption and investments in the second-half,” he said.
Highlights from First-Quarter GDP data:
- Gross fixed capital formation rose 2.11% year-on-year
- Government spending jumped 3.99% year-on-year
- By sector, transportation grew the fastest at 15.9%, followed by accomodation, food and beverages at 11.6%, and other services at 8.9%
- Unemployment rate eased to 5.45% in February, from 5.86% in the same month a year ago
–With assistance from Norman Harsono.
(Updates throughout with more details from the briefing)
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