Indonesia's Economy Grows 5.17% in Q2 This Year

Financial Market Outlook Exceeds Expectations

Indonesia's economy achieved a 5.17% growth in the second quarter of this year, surpassing market expectations.

According to the Indonesian Central Statistics Agency (BPS) on the 7th (local time), Indonesia's second-quarter Gross Domestic Product (GDP) was 5,226.7 trillion rupiah (approximately 450 trillion won), growing 5.17% year-on-year and 3.86% quarter-on-quarter.

This exceeded financial market forecasts. According to a survey of financial market experts conducted by major foreign media prior to the BPS announcement, Indonesia's economy was expected to grow 4.93% compared to one year ago and 3.72% compared to the previous quarter. BPS explained that the reason Indonesia was able to sustain growth above 5%, contrary to financial market expectations, was due to household consumption and government fiscal spending. Household spending increased by 5.23% due to Lebaran, Indonesia's largest holiday, and school vacations, while government spending rose 10.62% as the Joko Widodo administration focused on infrastructure development such as roads and irrigation systems.

On the other hand, exports decreased by 2.75% compared to last year. Last year, exports boomed as demand and prices for Indonesia's major export products, palm oil and coal, surged due to the end of the COVID-19 pandemic and the Ukraine war. However, this year, demand slowed due to interest rate hikes and a global economic downturn.

Myrdal Gunarto, an economist at Maybank Indonesia, said, "It seems that economic activity has reached its peak," and predicted, "While 5% growth may be possible this year, the economy is expected to slow somewhat from the second half."

President Joko Widodo of Indonesia
[Photo by Yonhap News]

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