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Indonesia GDP Q4 2018

Indonesia: Economy continues to motor ahead in the fourth quarter

The economy expanded 5.2% in the fourth quarter according to recent data released by Statistics Indonesia, matching Q3’s reading and FocusEconomics panelists’ expectations.

Domestic demand powered the expansion, with private consumption increasing 5.1% (Q3: +5.0% year-on-year), likely supported by mild inflation, elevated consumer confidence and a healthy labor market. Fixed investment grew a robust 6.0% (Q3: +7.0% yoy), while government consumption expanded 4.6% (Q3: +6.3% yoy).

The external sector strengthened in the fourth quarter. Although growth in exports of goods and services slipped from 8.1% in Q3 to 4.3% in Q4, against a backdrop of rising global protectionism and more sluggish momentum in China, import growth fell faster—from 14.0% in Q3 to 7.1% in Q4. This was likely influenced in part by government efforts to stem imports, as well as by lower global oil prices. As a result, the external sector subtracted 0.6 percentage points from growth, compared to the 1.5 percentage-point subtraction in the third quarter.

Looking ahead, private consumption should continue to drive the economy, aided by a lower unemployment rate. Moreover, government consumption could see a boost ahead of elections scheduled for April, and fixed investment should stay healthy, despite potential delays to public investment projects as the government looks to trim the current account deficit. However, rising global trade tensions and slower global growth will likely drag on the external sector.

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