Indonesia: GDP growth ticks down but remains resilient
GDP growth moderated slightly to 5.0% year on year in the second quarter, from 5.1% in the first quarter. The downtick largely stemmed from weaker public spending growth. That said, Q2’s result slightly exceeded market expectations. Meanwhile, on a quarter-on-quarter seasonally adjusted basis, activity rebounded by 3.8% in Q2, up from Q1’s 0.8% decline.
Looking at domestic activity, public consumption growth waned to 1.4% in Q2 (Q1: +19.9% yoy). That said, elsewhere in the economy, activity was more resilient. Private consumption increased 4.9% in the second quarter, matching the first quarter’s result. Meanwhile, fixed investment growth improved to 4.4% in Q2, following the 3.8% expansion recorded in the previous quarter, supported by a buildup in inventories.
On the external front, exports of goods and services growth improved to 8.3% year on year in the second quarter, which marked the best reading since Q1 2023 (Q1: +1.4% yoy). However, imports of goods and services growth picked up to 8.6% in Q2 (Q1: +1.9% yoy), marking the highest reading since Q3 2022.
Looking ahead, growth is forecast to hover near Q2’s rate in the remainder of the year. As a result, the economy will expand at a pace similar to 2023 in 2024 as a whole. Public spending will be a key engine of growth, with President-elect Prabowo Subianto’s stimulus program being a key factor to watch in the coming months. Additionally, resilient private spending and investment will further support momentum. Meanwhile, the global electronics sector upcycle will boost exports growth this year. Stronger-than-expected U.S. activity is an upside risk.
Nomura analysts Euben Paracuelles and Nabila Amani expect growth to stabilize from last year in 2024:
“[We] revise down our full-year 2024 GDP growth forecast slightly to 5.0% from 5.1%, stable from 5.0% last year. Our forecast pencils in a moderation of growth in H2 to 5.0% from 5.1% in H1, given signs of softer domestic demand.”
ANZ’s Krystal Tan holds a more pessimistic view:
“Looking ahead, we expect growth to ease further. The inventory boost is likely to prove temporary and the export rebound will not last. Sluggish growth and elevated stockpiles of coal and metals in mainland China, a key buyer, do not bode well for Indonesia’s export outlook. Notably, the rise in metal prices in Q2 has reversed, while prices for Indonesia’s other major commodity exports have remained lacklustre.”