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

1:17 am Monday, November 06th, 2023

(Adds dropped word “growth” in headline)

By Stefanno Sulaiman and Gayatri Suroyo

JAKARTA (Reuters) – 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% annually in the July-September quarter, compared with 5.05% predicted by economists surveyed by Reuters. Growth was 5.17% 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% in 2022, riding a global commodity boom.

The third-quarter growth also came in below the government’s 5.1% 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%, from 5.22% 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% from 2.97% 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% growth in the third quarter, versus 4.63% 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.

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 1.60% in the July-September period. The Reuters survey had expected a 1.71% expansion in that period compared with the previous three months.

(This story has been refiled to add the dropped word ‘growth’ in the headline)

(Reporting by Gayatri Suroyo; Editing by Kanupriya Kapoor and Shri Navaratnam)