Indonesia: Economy loses steam marginally in third quarter on weaker domestic momentum
The economy expanded 5.0% in the third quarter, according to recent data released by Statistics Indonesia, down from Q2’s revised 5.1% figure (previously reported: +5.0% year-on-year) but matching market expectations.
The domestic economy lost steam in Q3. The ebbing impact of election-related spending was likely partly behind slowdowns in private consumption (Q3: +5.0% yoy; Q2: +5.2% yoy) and government consumption (Q3: +1.0% yoy; Q2: +8.3% yoy). Moreover, fixed investment growth also fell (Q3: +4.2% yoy; Q2: +5.0% yoy) amid a slowdown in construction and machinery and equipment investment.
In contrast, the external sector strengthened somewhat in Q3. While exports flatlined (Q2: -2.0% yoy) against an unfavorable external backdrop, imports fell sharply (Q3: -8.6% yoy; Q2: -6.8% yoy), amid government import substitution policies aimed at reining in the current account deficit.
Going forward, our panelists see growth broadly stable in 2020, with stronger fixed investment largely offset by a weaker external sector as imports rebound.
Regarding prospects for next year, analysts at Nomura commented:
“In 2020 we forecast […] only a modest improvement from this year, in part because the 2020 budget envisages a smaller fiscal deficit and hence a negative fiscal impulse on growth.”