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Indonesia GDP Q2 2023

Indonesia: GDP growth surprises to the upside in Q2

The economy grew at a faster pace in the second quarter of 2023, with GDP expanding 5.2% on an annual basis, following the first quarter’s 5.0% increase. Q2’s reading came in slightly above market expectations.

Household spending growth accelerated to 5.2% year on year in Q2, up from Q1’s 4.5% amid declining inflation. Meanwhile, fixed investment growth sped up to 4.6% in Q2, from the 2.1% expansion recorded in the previous quarter. Lastly, government spending jumped 10.6% in Q2 (Q1: +3.5% yoy), partly due to a low base of comparison.

On the external front, exports of goods and services shrank 2.8% year on year in the second quarter (Q2: +12.2% yoy) amid a less supportive global economic environment. Meanwhile, imports of goods and services fell 3.1% in Q2 (Q1: +3.8% yoy).

In quarter-on-quarter terms, GDP rose 3.9% in Q2, swinging from Q1’s 0.9% sequential decline.

Commenting on the outlook, Nicholas Mapa, senior economist at ING, noted:

“The better-than-expected 2Q GDP growth has the economy on track to hit the yearly growth target of 5.0-5.3%YoY. With inflation softening further, we can expect household spending to offset soft export growth in the coming months. Meanwhile, increased economic activity ahead of the February 2024 election could also offset the slowing of capital formation, which appears to be weighed down by Bank Indonesia’s recent rate hike cycle.”

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