Indonesia’s economy is exceeding consumer and government spending forecasts

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By Webdesk

GDP grew by 5.03 percent in the January-March period, despite slowing exports.

Indonesia’s economic growth remained stable in the first quarter as improving consumption and government spending offset a slowdown in exports and investment in Southeast Asia’s largest economy.

Gross domestic product (GDP) grew 5.03 percent in the January through March quarter from a year earlier, data from Statistics Indonesia showed on Friday. That was faster than the average forecast of 4.95 percent in a poll by news agency Reuters and compared to growth of 5.01 percent in the fourth quarter.

Indonesia’s post-pandemic recovery has been aided by a commodity-led export boom, although analysts expect economic momentum to cool as commodity prices fall and global demand is hit by monetary policy tightening.

Bank Indonesia’s (BI) monetary tightening, including rate hikes totaling 225 basis points between August and January to fight inflation, could also hurt domestic demand.

The central bank has since paused tightening, and some economists expect interest rates to remain unchanged for the rest of the year, though others argue growth concerns may prompt BI to ease later this year.

In January through March, growth in household consumption, which accounts for more than half of GDP, picked up slightly to 4.54 percent, compared to 4.48 percent in the previous three months, while government spending increased by 4. percent from a previous contraction.

Meanwhile, export growth softened to 11.68 percent from nearly 15 percent in the fourth quarter. The statistics office said exports of Indonesia’s main products, such as coal, palm oil and metals, had remained strong.

Investments also declined.

“We think the economy will struggle in the coming quarters,” Capital Economics analyst Gareth Leather said in a note on the data.

The central bank estimates Indonesia’s economic growth will be at the upper end of a range of 4.5 to 5.3 percent, up from 5.3 percent in 2022.

The transportation, storage and hospitality sector posted the fastest year-on-year growth in the first quarter.

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