MACROECONOMIC ANALYSIS SERIES: Indonesia Economic Outlook Q3-2023

We would like to share LPEM’s Indonesia Economic Outlook Q3-2023. Available in both Indonesian and English, it contains our perspective on Indonesia’s economy with particular emphasis on the progress of GoI’s industrialization agenda.

Following are the highlights of this edition of Indonesia Economic Outlook Q3-2023:
Grew 5.03% (y.o.y) in Q1-2023, Indonesian economy has managed not only to reach the growth rate of 5% but also to grow beyond market consensus in the last six quarters.

Being the biggest sector in the Indonesian economy with the share of more than one-fifth, manufacturing sector kept growing below national growth rate since 2012, indicating the potential emergence of premature deindustrialization.
Looking at its expenditure component, all components recorded a positive growth, including government expenditure that posted four consecutive quarters of contraction in 2022.

Household consumption, which makes up more than half of the economy, grew 4.54% (y.o.y), higher than the last quarter of 2022.
Investment grew slower in Q1-2023 as it grew 2.11% (y.o.y), lower than 3.33% (y.o.y) in the previous quarter.
Domestic banks demonstrated relatively strong indicators underpinned by adequate liquidity and improved asset quality. In April 2023, NPL ratio remained stable at 2.53%.

In July 2023, inflation rate was recorded at 3.08% (y.o.y), plummeted to its lowest level in 16 months as inflationary pressures subside faster than expected.

Trade surplus has been declining since last year with the current surplus only reach USD7.8 billion in Q2-2023 due to global commodity prices normalization.

We estimate GDP to continue growing positively at 5.09% (y.o.y) in Q1-2023 and 4.9% -5.0% for FY2023.

Thank you for your attention and please feel free to use or share with your colleagues.

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