Indonesia’s economy grows at fastest pace in more than a year in Q3 By Reuters

By Gayatri Suroyo and Fransiska Nangoy

JAKARTA (Reuters) -Indonesia’s economy expanded at its fastest pace in more than a year in the third quarter, as improved investment and government spending underpinned growth in Southeast Asia’s largest economy.

Gross domestic product expanded 5.72% year-on-year, up from 5.44% growth in the second quarter but below a forecast of 5.89% in a Reuters poll of economists.

Unadjusted for seasonal factors, GDP grew 1.81% from the previous three months, above the 1.62% growth forecast in the poll.

Investment expanded 4.96% annually in the third quarter – at its fastest pace in over a year – while government spending shrank more slowly than in the previous quarter.

Exports expanded nearly 22% year-on-year in the third quarter, picking up pace from growth of just under 20% in the April-June quarter. Indonesia expects to post the country’s largest ever export earnings in 2022 as the resources-rich country has benefited from rising commodity prices.

While Indonesia’s economy has seen an export boom this year, the outlook looks uncertain as tightening monetary policies across the world and soaring inflation risk derailing the global economy. An economic slowdown in China – Indonesia’s biggest trade partner – and the Bank Indonesia’s own rate-hiking campaign could also cloud the country’s growth prospects.

“Indonesia’s economic activity will tend to decline in the 4Q22 period, in line with the current declining global conditions … as well as a restrained increase in purchasing power due to inflationary pressures,” said Myrdal Gunarto, an economist at Maybank Indonesia.

He said the “strong” third-quarter figures reflected the normalisation of economic activities after the easing of COVID-19 restrictions earlier this year.

Bank Indonesia has raised interest rates by a total of 125 basis points since August to contain inflation, which hit a seven-year high in September after the government raised subsidised fuel prices that month.

Finance Minister Sri Mulyani Indrawati has said the government would work to maintain Indonesia’s position as a relative “bright spot”, but warned about the impact of a potential global recession.

Growth accelerated in the manufacturing, transport, wearhousing and hospitality industries, the data also showed.