First quarter growth disappoints in Indonesia

May 5, 2017

JAKARTA – First quarter GDP in Indonesia has undershot market expectations, with both private consumption and investment continuing to grow at the same pace as in the previous quarter. On the positive side, exports materially strengthened. Government spending also rose, following two consecutive quarters of contraction.

On a q/q non-seasonally adjusted basis, the pace of contraction in Indonesia’s economy eased to 0.34%, from a decline of 1.77% in the preceding quarter, ANZ Bank says in a client note. “Looking ahead, we do expect growth to strengthen moderately.”

ANZ says the  moderate acceleration and limited demand-pull inflation pressures suggest that Bank Indonesia (BI) will remain on hold through 2017.

Q1 growth edged up marginally largely on the back of stronger exports and a resumption in Government consumption spending. Government consumption increased 2.7% y/y, reversing the contraction seen in the previous two quarters.

Export growth of 8% y/y was also the fastest in more than three years.

In contrast, private consumption and investment failed to accelerate. Growth of 5% y/y and 4.8% y/y respectively in these two components, was broadly unchanged from that in Q4 2016.

Going forward, ANZ says, Government infrastructure spending could become more supportive of overall growth. (ATI).