The Statistical Agency of Indonesia (Badan Pusat Statistik, BPS) released Indonesia’s Q1-2022 gross domestic product (GDP) data on 9 May 2022. Based on its calculation the Indonesian economy expanded 5.01 percent year-on-year (y/y), which is in fact better –albeit very modestly– than our projection that was set at 5.0 percent (y/y).
While most macroeconomic indicators indeed pointed at a positive environment for economic growth in Q1-2022, there did occur the threat of the Omicron wave that peaked in Indonesia in mid-February 2022 (with the peak at almost 65,000 positive test results per day). Fortunately, this wave did not translate to a significant number of people requiring medical treatment, hence there was no need for the government to scale up existing social and business restrictions significantly. And so, economic activity was not overly burdened in Q1-2022, which is reflected in the GDP data.
Obviously, considering the Indonesian economy contracted in Q1-2021, the low base effect is also still at play, hence managed to push Indonesia’s Q1-2022 rate to a level that is perhaps modestly misleading in the sense that the economy is not fully back to normal yet, despite the fact that the Indonesian economy typically posted growth rates of around 5 percent (y/y) in 2016-2019 (see table 1 below). For example, the tourism industry is still miles away from recovery, implying Indonesia misses out on billions of US dollars in foreign exchange earnings.
In short, what supported Indonesia’s Q1-2022 economic growth were particularly the following factors (these factors will be discussed in more detail below):
- Indonesia’s export performance was very strong thanks to high commodity prices (despite a small hiccup in coal exports in January 2022 amid state intervention);
- Household consumption continued to recover in Indonesia as the COVID-19 threat wanes (albeit not fully back to pre-COVID-19-crisis levels yet);
- Investment continued to recover in Indonesia on expectations that there will no need for tighter social and business restrictions in the foreseeable future; and
- The low base effect as weak economic growth (in fact: contraction) in the same quarter one year earlier facilitates a strong growth rate in Q1-2022.
Taking a Closer Look at the Data
When we take a look at current prices and constant prices (inflation-adjusted with BPS using 2010 as base year), it is clear that the Indonesian economy was bigger in Q1-2022 than it was in the corresponding quarters in previous years. Hence in terms of size, the economy of Indonesia has already recovered from the COVID-19 crisis (in fact, in terms of size, the Indonesian economy had already recovered last year).
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