Indonesia: GDP growth records best reading in a year in Q2
GDP growth gained steam to 5.4% year on year in the second quarter, from 5.0% in the first quarter. Q2’s reading marked the fastest increase since Q2 2021 and came in above market expectations.
Looking at the release, the improvement was largely driven by household spending and a robust external sector. Private consumption accelerated to 5.5% yoy in the second quarter, which marked the best reading since Q2 2021 (Q1: +4.3% yoy). Government consumption, meanwhile, dropped at a more moderate pace of 5.2% in Q2 (Q1: -7.6% yoy), while fixed investment growth fell to 3.1% in Q2 (Q1: +4.1% yoy), marking the worst reading for a year.
Exports of goods and services increased 19.7% on an annual basis in the second quarter, which was above the first quarter’s 16.7% expansion. Conversely, imports of goods and services growth waned to 12.3% in Q2 (Q1: +15.9% yoy), marking the lowest reading since Q1 2021.
On a seasonally-adjusted quarter-on-quarter basis, the economy expanded 1.0% in Q2, ticking down from the prior quarter’s 1.2% rise.
Commenting on the outlook, Nicholas Mapa, senior economist at ING, noted:
“Slower global growth could weigh on export growth prospects, especially if a slower growth outlook translates to sliding coal prices. On the domestic front, the sustained acceleration in headline inflation could eventually sap some momentum from household spending and drag on overall GDP. […] However, the eventual BI [Bank Indonesia] rate hike (in late 3Q or early 4Q) coupled with accelerating inflation could eventually slow Indonesia’s economy with full-year GDP likely at 4.6% for the year.”