Indonesia Q2 GDP growth strongest in three quarters

By Stefanno Sulaiman and Gayatri Suroyo

JAKARTA (Reuters) -Indonesia’s economic growth in the second quarter accelerated unexpectedly to its highest rate in three quarters, shored up by strong household and government spending and despite its exports weakening amid falling commodity prices.

Southeast Asia’s biggest economy expanded 5.17% in the April-June quarter from the same period a year earlier, faster than the 4.93% growth predicted by economists polled by Reuters. First-quarter growth was revised up slightly to 5.04%.

On a quarterly, non-seasonally adjusted basis, GDP expanded 3.86%, compared with the poll’s prediction of 3.72% growth.

Indonesia’s post-pandemic recovery received a boost from a commodities-led export boom last year, but analysts expect momentum to cool as prices for its top products, like palm oil and coal, fall and global demand weakens with interest rate hikes in many countries.

Indonesia’s own monetary tightening of 225 basis points from August 2022 to January 2023, was also seen hurting domestic demand.

However, household consumption, which makes up over half of GDP, expanded 5.23% on a yearly basis last quarter, the quickest pace since the third quarter of 2022.

That was due to rising household spending for the Muslim fasting month and Eid al-Fitr festivities in late April and the June school holidays, the statistics bureau said.

Growth in investment and government spending also more than doubled to 4.63% and 10.62%, respectively.

Meanwhile, exports contracted 2.75% in the second quarter on a yearly basis, in a stark contrast to last quarter’s growth of more than 10%.

Last year’s growth was 5.3%, a nine-year high. The government is targeting the same growth rate for 2023. The central bank predicts GDP will expand in a range of 4.5% to 5.3% this year.

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