Indonesia's Economic Growth in Q3 2023

By Stefanno Sulaiman and Fransiska Nangoy

JAKARTA (Reuters) – Indonesia's gross domestic product (GDP) in the third quarter grew by 4.95% compared to the previous year, marking its slowest annual growth rate in a year, according to data from the statistics bureau released on Tuesday. This growth rate slightly fell short of the 5% annual growth expected by analysts surveyed by Reuters, and it was lower than the 5.05% growth seen in the second quarter.

On a quarterly, non-seasonally adjusted basis, GDP expanded by 1.50%, just below the forecast of 1.59%.

Household consumption, which represents about half of Indonesia's GDP, increased by 4.91% annually in the third quarter, down from 4.93% in the previous quarter, reflecting a slowdown in spending on items like clothing and housing. Amalia Widyasanti, the acting head of Statistics Indonesia, commented on the data during a press conference.

Investment, however, rose by 5.15% year-on-year, the highest growth rate in a year, driven mainly by investments in the new capital city and various infrastructure projects. Government spending and exports also saw an increase.

Radhika Rao, an economist at DBS Bank, noted that the third-quarter growth aligns with expectations, pointing out that the growth in investment and a rebound in exports helped offset the decline in household consumption.

Airlangga Hartarto, Indonesia's chief economic minister, projected that full-year GDP growth would be around 5%. He stated, "We will continue to support household consumption and investment," expressing hopes to sustain economic growth through year-end.

Hartarto also mentioned existing government incentives, such as a tax break on certain property sales, which are anticipated to boost consumption. Additionally, the government is planning policies to assist labor-intensive industries in preventing layoffs.

In a move to support the economy, Bank Indonesia reduced interest rates in September and maintained them in October, amidst rising tensions in the Middle East affecting the rupiah.

The GDP data reinforces DBS Bank's prediction of a potential rate cut by the central bank this quarter, provided that the rupiah remains stable. As of Tuesday, the rupiah closed 0.13% stronger, rebounding from its lowest level since August reached earlier in the day.