Indonesia’s Q3 GDP growth weakest in 2 years, exports slump further

A worker walks past stacks of containers at Tanjung Priok port in Jakarta, Indonesia, Feb 3, 2023. REUTERS/Ajeng Dinar Ulfiana/File photo

JAKARTA  – Indonesia’s annual economic growth slowed more than expected in the third quarter to its weakest in two years, official data showed on Monday, as exports shrank further and household consumption weakened.

Gross domestic product (GDP) grew 4.94 percent annually in the July-September quarter, compared with 5.05 percent, predicted by economists surveyed by Reuters. Growth was 5.17 percent in the second quarter.

Economists widely expect growth in Southeast Asia’s largest economy to cool this year, due to tighter monetary policy, falling commodity prices and weakening global growth.

The resource-rich country had recorded its highest growth in nine years of 5.3 percent in 2022, riding a global commodity boom.

The third-quarter growth also came in below the government’s 5.1 percent prediction. Authorities had expected the same pace for full-year 2023 growth, hoping that some of the decline in exports will be offset by rising spending related to campaigning for the Feb. 14, 2024 general elections.

In the July-September period, household spending growth decelerated to 5.06 percent, from 5.22 percent in the previous three months. While the pace only dropped slightly, this affected the overall economic expansion rate as household consumption accounts for more than half of GDP.

Moreover, the contraction in exports deepened to 4.26 percent from 2.97 percent in the second quarter, with government spending also falling on a yearly basis.

A bright spot in the GDP breakdown came from investment, which recorded a 5.77 percent growth in the third quarter, versus 4.63 percent in the second quarter.

In addition to falling exports, the central bank’s resumption of monetary tightening in October is further hurting the growth outlook.

READ: Indonesia central bank unexpectedly raises rates amid falling rupiah

Bank Indonesia unexpectedly raised interest rates last month to defend the rupiah, which has been facing pressures amid uncertainties related to U.S. monetary tightening and the Ukraine and Middle East conflicts.

On a non-seasonally adjusted, quarter-on-quarter basis, gross domestic product expanded 1.6 percent in the July-September period. The Reuters survey had expected a 1.71 percent expansion in that period compared with the previous three months.