Indonesia’s GDP growth picks up in second quarter, beats forecasts

  • Q2 GDP +5.44% y/y, higher than +5.17% in a survey
  • Exports up nearly 20%; “impressive”, according to the statistics office
  • Headwinds seen in second half – analyst

JAKARTA, Aug 5 (Reuters) – Indonesia’s economic growth accelerated in the April-June quarter amid an export boom driven by rising commodity prices, official data showed on Friday, but monetary tightening, rising inflation and a risk of global recession threaten the outlook.

The second-quarter gross domestic product (GDP) rose 5.44 percent from a year earlier, posting the fastest growth rate in a year, according to data from Statistics Indonesia. That beat the median forecast of a 5.17% rise in a Reuters poll and 5.01% annual growth in the first quarter.

Exports rose nearly 20% from a year earlier, a performance the statistics office called “impressive.” This compares to the 16.22% annual growth seen in the previous quarter.

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Household consumption, which accounts for more than half of GDP, recovered further after the lifting of COVID-19 restrictions, with the celebration of Eid al-Fitr in May providing further impetus. However, investment has slowed.

By sector, food and beverage, mining, construction, and transportation and warehousing expanded faster than in the previous period.

That’s “strong growth but it won’t last as long as headwinds pick up,” Capital Economics analyst Gareth Leather said in a note, predicting exports would be hurt by lower commodity prices and a slowdown in global growth.

Prices for palm oil, one of the country’s main export commodities, have fallen in recent months, but Indonesian coal prices are still hovering around record highs due to strong demand from markets such as the ‘Europe.

Already, the Indonesian central bank said last month that GDP growth for the year 2022 compared to 2021 would be at the lower end of the 4.5% to 5.3% range. It previously forecast growth in the middle of that range. Read more

Lowering its forecast, the central bank said a global slowdown would dampen exports and rising inflation at home would slow the recovery in consumption.

Consumer prices in July rose 4.94% from a year earlier, marking a seven-year high for inflation and prompting economists to call on Bank Indonesia to raise interest rates. interest in pandemic-era lows. Read more

While the latest GDP data showed “the relatively insular nature of the Indonesian economy” at a time when recession fears dominate the headlines, the fact that the economy is doing well should push the Bank of Indonesia to raise interest rates, said Wellian Wiranto, an economist at OCBC.

OCBC expects the central bank to raise interest rates in this month’s policy review.

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Reporting by Stefanno Sulaiman and Gayatri Suroyo; Additional reporting by Fransiska Nangoy; Editing by Bradley Perrett

Our standards: The Thomson Reuters Trust Principles.

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