Indonesia: GDP moderates to lowest level in five years in Q3
November 6, 2014
In the third quarter, GDP grew 5.0% over the same quarter last year. The expansion was just below the 5.1% increase observed in the second quarter and marked the weakest growth rate since Q3 2009. GDP growth rates have been decelerating almost uninterruptedly since Q4 2010. The result slightly undershot market expectations of a 5.1% rise. The slowdown in Q3 was driven by continued sluggishness in the export sector and moderating investment. Moreover, the result puts additional pressure on recently installed president Joko Widodo as he seeks to revitalize the economy.
On the domestic side of the economy, total consumption increased 5.3% (Q2: +4.8% year-on-year). Private consumption growth moderated slightly from a 5.6% increase in Q2 to a 5.4% rise in Q3, although government consumption rebounded from a 0.8% contraction in Q2 to a 4.5% expansion in Q3. Meanwhile, fixed investment growth moderated from 5.2% to 4.0%, which marked the lowest level since Q3 2009.
The external sector continued to suffer the effects of a mineral export ban that the government introduced at the beginning of the year in an attempt to promote the development of a domestic processing industry. Exports contracted 0.7% in Q3, which followed the 0.8% drop registered in Q2 and marked the third consecutive drop. Imports registered a 3.6% contraction in Q3 (Q2: -5.1% yoy). As a result, the external sector’s net contribution to overall growth decreased from 2.1 percentage points in the second quarter to 1.4 percentage points in the third quarter.
Author: Carl Kelly, Economist