Indonesia Economic Growth Slows to 4.94% in Third Quarter

Indonesia’s economy ended seven straight quarters of above-5% growth as exports and government spending shrank, Bloomberg reported.

Official data Monday showed gross domestic product expanded 4.94% in the third quarter from a year ago, less than the 5% median estimate from analysts surveyed by Bloomberg. The economy grew 1.6% from the previous three months, also softer than the 1.67% survey estimate.

While markets shrugged off the weaker-than-expected growth print that was overshadowed by optimism that the Federal Reserve is nearing the end of its tightening cycle, the latest GDP data underscores the headwinds to recovery for Southeast Asia’s largest economy.

Government spending fell 3.76% in the July-September period compared to the 10.6% boost it provided in the second quarter, according to data compiled by Bloomberg. That trimmed 0.28 percentage points from the third-quarter growth print, the statistics bureau said. The spending drop also came as Indonesia’s fiscal health continues to improve.

Exports, also a key growth driver for the country, contracted 4.26% in the third quarter. That was the biggest drop since end-2020, amid sluggish global demand for Indonesia’s commodities such as coal and palm oil.

The rupiah built on its gains, strengthening 1.3% as of 12:18 p.m. local time to 15,526 against the US dollar. The benchmark stock index was up 0.7%.

Private consumption, which accounts for more than half of Indonesia’s economy, posted a slower growth of 5.06%. Gross fixed capital formation, or investments to create assets, expanded at its fastest pace in two years at 5.77%, thanks to increased building, vehicle and capital goods.

Still, higher borrowing costs risk crimping consumption and investment. Indonesia’s central bank unexpectedly raised its benchmark rate to a four-year high of 6% last month to support a weakening rupiah.

Finance Minister Sri Mulyani Indrawati said last month that additional social aid and tax incentives should put Indonesia’s economy on track to grow 5.1% in 2023.

The government posted a fiscal surplus as of September worth nearly 68 trillion rupiah ($4.4 billion), and it expects the full-year deficit to come in below the expected 2.28% of GDP.