Indonesia International Reserves (months of imports)

The economy lost steam in the fourth quarter of last year, with year-on-year growth decelerating from Q3. Private consumption growth slowed, restrained by sustained high inflation, as did fixed investment growth amid higher interest rates. Moreover, the expansion in exports softened amid a less supportive global economic environment. Meanwhile, public spending decreased at a sharper pace as the government continued to tighten the purse strings following the recent reinstatement of the 3.0% fiscal deficit cap. A high base of comparison should translate into a further deceleration in year-on-year GDP growth in the current quarter. That said, available data points to strengthening underlying conditions: In January, the manufacturing PMI moved further into expansionary terrain, and inflation eased. However, tighter financing conditions are likely putting a lid on investment activity.