Indonesia grows faster than expected

JAKARTA: Indonesia’s economic growth accelerated faster than expected in the second quarter of the year, official data showed on Monday, the strongest rate in three quarters despite lagging exports.

Southeast Asia’s largest economy grew 5.17 percent on-year between April and June, according to Statistics Indonesia, beating analysts’ expectations.

The continued growth was driven by household spending, foreign and domestic investment and increased government spending, Statistics Indonesia official Edy Mahmud told reporters.

“During the second quarter of 2023, Indonesia’s economic performance was supported by the increase of people’s mobility and religious holidays that drive up people’s consumption and production activities,” Mahmud said.

He emphasized the resilience of Indonesia’s economy emerging from the Covid-19 pandemic despite exports contracting for the first time since the last quarter of 2020, owing in part to declining palm oil prices.

Exports fell 2.75 percent compared to the same quarter last year, figures showed.

Indonesia posted growth last year of 5.3 percent the highest for nine years on the back of soaring export prices and the lifting of travel restrictions.

Jakarta is targeting the same figure again this year.

But analysts expect a slowdown in the coming months as record global commodity prices stoked by the Ukraine war start to ease.

“Lower commodity prices and weaker global demand weighed heavily on exports last quarter,” said Gareth Leather, senior Asia economist at Capital Economics.

“Our forecast that global growth will struggle and that commodity prices will remain subdued suggests that exports will stay weak.” Leather predicted Indonesia’s quarterly growth would fall to around 4.5 percent in the coming months while official figures indicate it will remain at around 5 percent.