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Indonesia GDP Q1 2021

Indonesia: GDP records best reading since Q1 2020 in Q1

GDP slid at a softer rate of 0.7% year-on-year in the first quarter, above the 2.2% contraction logged in the fourth quarter of last year. Q1’s reading marked the smallest drop since Q1 2020.

The upturn reflected a broad-based improvement in private consumption, public spending, fixed investment and exports. Household spending declined at a softer pace of 2.2% year-on-year in Q1 after contracting 3.6% in Q4, while public spending growth accelerated to 3.0% (Q4 2020: +1.8% yoy). Lastly, fixed investment slid at a more moderate pace of 0.2% in Q1 compared to the 6.2% decrease logged in the prior quarter.

Exports of goods and services bounced back in the first quarter, growing 6.7% year-on-year (Q4 2020: -7.2% yoy). In addition, imports of goods and services rebounded in Q1, growing 5.3% (Q4 2020: -13.5% yoy) and marking the best reading since Q4 2018.

GDP is set to expand at a healthy pace this year, after the pandemic hit the economy in 2020. Supportive fiscal and monetary policies and unleashed pent-up demand should prompt a rebound in household and capital spending, while a brighter international backdrop will support foreign demand. Possible delays in vaccination programs at home and abroad pose downside risks, however.

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

“We continue to expect better growth numbers from Indonesia with prospects for faster growth tied largely to the vaccination efforts. Increased protection from the vaccine will help stimulate domestic demand while manufacturing activity will also likely continue to expand as global trade improves and exports pick up. The potent mix of fiscal and monetary stimulus alongside the vaccination rollout should translate to an overall improving growth outlook in the coming quarters.”

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