Another quarter of impressive growth

INDONESIA - Report 30 Aug 2023 by Cyrillus Harinowo

The Indonesian economy posted another quarter of encouraging growth results in Q2 2023 with GDP at 5.17%, slightly above the 5.03% annual growth pace of Q1 2023. Compared to the previous quarter, the Indonesian economy expanded by 3.86%, following the regular cycle. The fastest sector of growth in Q2 2023 was transportation and warehousing, at 15.28%, while "other services" grew by 11.86%. On the expenditure side, the highest growth was in government expenditure, which rose by 10.62%. By region, Eastern Indonesia achieved a strong rate of growth in Q2 2023. Several provinces in the Eastern part of Indonesia have consistently grown at a faster pace than the other provinces.

The improvement of the economy was accompanied by a deficit in the current account for that quarter. While in Q1 2023, the current account reported a surplus of $2,982 million or 0.9% of GDP, in Q2 2023 it registered a deficit of $1,933 million or 0.55% of GDP. At the same time, the financial and capital account of the balance of payments recorded a large deficit of $4,969 million. The deficit in the current account combined with the sizable deficit in the financial account led to an overall balance of payments deficit of around $7,372 million. The deficit of the balance of payments led foreign exchange reserves to fall to $137,541 million.

The Central Board of Statistics released the balance of trade data for July 2023. Exports increased by 1.36% M/M, reaching $20,881.1 million in July, with non-oil exports increasing by 1.62% to $19,654.3 million. At the same time, imports rose at a faster pace, by 14.1% to reach $19,568.4 million, resulting in a trade surplus of $1,312.7 million, another large surplus, but sharply lower than the previous month.

The Central Board of Statistics also released the inflation report, which showed that inflation has slowed significantly. For the month of July 2023 inflation was reported at 0.21%. With that performance, Y/Y inflation stood at 3.08%, a level sharply lower than the previous month, which was already in the upper part of the target corridor of the Central Bank. Based on that performance, Bank Indonesia decided to keep the interest rate constant at 5.75%.

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