In the final quarter of the year, Indonesia's economy demonstrated remarkable resilience, with a robust growth rate of 5.0% compared to the previous year. This encouraging performance was underpinned by strong domestic consumption, even in the face of challenges such as shrinking exports and declining commodity prices. These insights emerge from a recent Reuters poll conducted among 23 economists.
Notably, private consumption emerged as the driving force behind Southeast Asia's largest economy, remaining sturdy despite the backdrop of a cumulative 250 basis points increase in interest rates by Bank Indonesia since August 2022.
The poll's median forecast of 5.00% growth for the last quarter of the previous year was marginally higher than the 4.94% expansion experienced in the preceding quarter. Stay tuned for the release of the official data on February 5th.
Looking at a quarter-on-quarter basis, the economy grew by 0.41% during the October-December period, as indicated by a smaller sample in the Reuters poll conducted from January 25th to 31st.
Economist Irman Faiz, from Bank Danamon, emphasized that the current policy rate did not exert undue restraint on economic growth. Consumer enthusiasm for taking out loans remained robust, and consumption, working capital, and investment performed well. Faiz noted that Bank Indonesia shared this perspective, acknowledging resilient growth despite a global economic slowdown and export contraction.
Indonesia, a country rich in resources, did report a decrease in its 2023 trade surplus due to reduced exports and imports, which was influenced by falling commodity prices. Additionally, the subdued demand from China, Indonesia's largest trading partner, placed further pressure on its exports.
Jeemin Bang, an associate economist at Moody's Analytics, pointed out that monthly exports and imports experienced year-on-year declines throughout the last quarter. This was primarily attributed to weakened demand from China and other key export partners. However, despite these challenges, Indonesia's economic expansion has demonstrated relative stability in recent years, with expectations for this trend to persist. Consumption growth is expected to moderate, as the post-pandemic recovery reaches its mature phase.
In terms of future projections, the economy is forecasted to maintain its growth momentum, targeting a 5.0% growth rate for this year as well. This forecast aligns with a separate Reuters survey and falls within the estimate range of 4.5% to 5.3% outlined by Bank Indonesia.