Official statistics released Monday revealed that GDP increased 4.94% year on year in the third quarter, less than the 5% median forecast of Bloomberg-surveyed experts. The economy expanded by 1.6% during the preceding three months, lower than the 1.67% survey projection.
While markets brushed off the weaker-than-expected growth report, which was overshadowed by hopes that the Federal Reserve is approaching the conclusion of its tightening cycle, the new GDP data highlights the challenges facing Southeast Asia’s biggest economy.
According to Bloomberg statistics, government expenditure declined by 3.76% from July to September, compared to a 10.6% increase in the second quarter. According to the statistics office, this reduced third-quarter growth by 0.28 percentage points. The decrease in expenditure comes as Indonesia’s fiscal condition improves.
Exports, another essential development engine for the economy, fell 4.26% in the third quarter. This was the most significant dip since the end of 2020, owing to weak global demand for Indonesian commodities such as coal and palm oil.
The rupiah extended its gains, rising 1.3% to 15,526 per US dollar at 12:18 p.m. local time. The S& P 500 index gained 0.7%.
Private consumption, which accounts for more than half of the Indonesian economy, grew at a slower 5.06% rate. Gross fixed capital formation, or asset creation investments, surged at the quickest rate in two years, at 5.77%, mainly due to higher construction, automobile, and capital goods purchases.
Nonetheless, increased borrowing prices pose a threat to consumption and investment. To strengthen the rupiah, Indonesia’s central bank unexpectedly hiked its benchmark rate to a four-year high of 6% last month.
Last month, Finance Minister Sri Mulyani Indrawati said that more social assistance and tax breaks could keep Indonesia’s GDP on pace to expand 5.1% in 2023.
The government reported a fiscal surplus of about 68 trillion rupiah ($4.4 billion) in September, and it anticipates the full-year deficit to be less than the predicted 2.28% of GDP.
Productivity is crucial because a gain in revenue can only be sustained if infrastructure is improved, such as power generation, transportation networks, and technical breakthroughs that aid in the production of additional products and services.
Income and asset value changes may be used to gauge economic growth. To effectively quantify economic development, one must monitor a country’s rise in real national and per capita income over time.