Economists polled between July 27 and August 3 expect Indonesia's economy to have lost some steam in the second quarter, with year-on-year gross domestic product expansion forecast at 5.10% for April-June. That rate is lower than the 5.61% growth recorded in the January-March quarter, according to the poll of 28 economists. On a sequential basis, GDP was forecast to rise 3.50%, a rebound from a modest contraction in the prior quarter. Official data will be released on Wednesday.
Panelists pointed to cooling consumer demand after the peak spending associated with the country’s festive season. "We have consumption slowing, partly because of the festive season drag, but also because fiscal policy support for consumption has not been that strong," said Lavanya Venkateswaran, senior ASEAN economist at OCBC Bank.
Retail activity underscored that slack. Official retail sales fell 3.7% year-on-year in April and 3.9% in May, marking the steepest contractions in three years and signaling softer domestic consumption going into the second quarter.
At the same time, net exports were less of a tailwind than in previous periods even though commodity prices were higher. The energy import bill rose sharply in April and May amid the U.S.-Iran war, and official figures showed a $1.61 billion trade deficit in May - the first monthly deficit in six years.
OCBC’s Venkateswaran noted: "Compared with regional peers, Indonesia’s export growth has not been as strong. So we expect this to continue to be a drag in the second quarter." The poll also found that government spending remained a supportive factor for growth, but economists cautioned its contribution would likely moderate after a near 22% surge in the first quarter.
Authorities have allocated 381.3 trillion rupiah, equivalent to $21.20 billion, for energy subsidies intended to shield households from higher fuel and electricity costs tied to the conflict in the Middle East. Currency movements and monetary policy adjustments were also highlighted in the poll's broader context.
A separate poll found the economy is expected to broadly maintain growth of around 5% in coming quarters despite the headwinds of higher energy prices and monetary tightening. Bank Indonesia has raised interest rates by 100 basis points since May in an effort to support the rupiah, which remained down more than 7% for the year at the time of the survey.
On the outlook for domestic activity, ANZ economist Krystal Tan said: "While credit growth remained robust, this was unlikely to fully offset broader signs of cooling activity. Looking ahead, the recent tightening in financial conditions, external uncertainty and still-cautious private sector sentiment are likely to limit the pace of growth."
Economists also warned that headline growth figures may conceal widening disparities across income groups, and that the current pace of expansion is well below President Prabowo Subianto’s 8% growth target by 2029.
($1 = 17,990 rupiah)