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Indonesia’s economic growth fell to its weakest in two years in the third quarter, official data showed, mainly due to continued decline in exports and weak household consumption. The annual gross domestic product (GDP) growth rate in the third quarter was 4.94%, slightly lower than expected and the previous quarter’s 5.17%. The decline is widely attributed to tightening monetary policy, falling global commodity prices and weakening global economic growth.
The government had previously forecast growth of 5.1% for all of 2023, hoping that increased spending related to general election campaigns could offset some of the decline in exports. Household consumption accounts for more than half of GDP, so a slight decline in household spending also has an impact on overall economic growth. However, investment growth has brought a bright spot to economic growth. Investment growth in the third quarter was 5.77%, higher than the 4.63% in the previous quarter.
Despite the bleak economic outlook, Bank Indonesia restarted monetary tightening in October to defend the rupiah and face pressure from U.S. monetary policy and global geopolitical uncertainty.
(Source: Reuters Image source: freepik)
