While we had hoped to see Indonesia’s gross domestic product (or GDP) growth rate at 5.0 percent year-on-year (y/y) in the third quarter of 2023 (Q3-2023), it was not a real surprise to see the growth rate fall slightly below that level.
After all, a range of economic data (discussed in our October 2023 report) did not show great results (such as retail sales, car sales, and remarkably low core inflation) in the second half of 2023 (so far). Not that they are particularly bad, but they do seem to indicate that the Indonesian economy has lost some steam.
But, we should also not forget that economic data in Q3-2023 were also affected by the high base effect that still stems from the COVID-19 crisis. Considering economic growth in Q3-2022 was higher-than-usual (at 5.73 percent y/y) due to the low base in Q3-2021 (at 3.53 percent y/y), we continue to see some normalization in Q3-2023 (see table 1).
And so, when the Statistical Office of Indonesia (in Indonesian: Badan Pusat Statistik, BPS) announced on 6 November 2023 that Indonesian GDP grew by 4.94 percent (y/y) in Q3-2023, it was quite in line with expectations. However, the latest result does mean that the Indonesian government’s target of 5.3 percent (y/y) in full-year 2023 requires a miracle to be achieved.
Indeed, when we take a quick look at the latest data (which will be discussed in detail below), we don’t detect any particular weaknesses. Yes, government consumption did drop somewhat, but this category doesn’t have a big impact on overall GDP. And yes, exports fell on a year-on-year basis, but imports slid more, thereby allowing the continuation of a comfortable trade surplus (although we certainly do not intend to give the impression that sliding imports are a good thing for the economy as it could point at weaker investment realization, weaker consumption, and even a weakening export performance as Indonesia’s non-commodity exports contain a high import-content).
And after seeing the latest data we become even more convinced that our 5.0 percent (y/y) projection for the Indonesian economy in 2023 is a highly realistic one, as we expect the country’s GDP growth in the final quarter of 2023 to be in the range of 5.0 – 5.1 percent (y/y).
Q3-2023 Indonesian GDP in Constant and Current Prices
Based on current prices, Indonesian GDP reached a level of IDR 5,296.0 trillion (or approx. USD $341.68 billion using an IDR 15,500 per US dollar exchange rate) in Q3-2023. Interestingly enough, GDP in current prices shows sliding growth (expanding 4.0 percent y/y in Q3-2023 compared to a 6.2 percent y/y growth rate in Q2-2023).
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