Official data released Monday showed that the annual economic growth of Indonesia slowed more than was forecast in the third quarter, hitting its weakest reading in two years, due mostly to weakening exports and shrinking household consumption.
In the July-September quarter, the gross domestic product (GDP) increased by 4.94% annually, compared with the prediction of a group of economists surveyed by Reuters of 5.05%. Growth reached 5.17% in the second quarter.
It has been assumed by economists that Southeast Asia’s largest economy would see growth cool in 2023, with tighter monetary policy, falling commodity prices, and weakening global growth all contributing to the slowdown.
In 2022, the resource-rich nation had seen its highest level of growth in nine years due to the global commodity boom.
The growth in the third quarter was also below the forecast by the government for 5.1%. The government had expected to see the full year growth figure come in at the same level, based on hopes that the declining exports would be made up for by increased spending produced by the campaigns for the general elections on February 14th, 2024.
Household spending decelerated in the third quarter, from the second quarter’s reading of 5.22% to 5.06%. Since household consumption accounts for about half of the nation’s total GDP, even though the decline was slight, it affected the overall expansion rate.
Meanwhile, in exports, the contraction deepened to 4.26%, compared to the second quarter’s reading of a 2.97% contraction. Spending by government also declined on an annual basis.
One sector bucking the gloomy trends was investment, which in the third quarter grew by 5.77%, compared to a growth of 4.63% in the second quarter.
Analysts note that the resumption of monetary tightening by the nation’s central bank in October was another pressure, on top of falling exports, which harmed the nation’s growth outlook.
Last month Bank Indonesia raised interest rates unexpectedly to strengthen the rupiah, which had been weakening due to uncertainties around US monetary tightening, and the conflicts in the Ukraine and Middle East.
Over the July-September period, gross domestic product expanded 1.60% on a non-seasonally adjusted, quarter-on-quarter basis. The survey by Reuter had forecast a 1.71% expansion over that period compared with the previous quarter.
