Indonesia’s GDP Growth Slightly Decelerates in Third Quarter
Indonesia’s annual economic growth saw a minor deceleration in the third quarter of the year, with official data released on Wednesday showing the pace of expansion at 5.04% in the three months ending September.
This figure represents a slight cooling from the 5.12% growth rate recorded in the preceding April-to-June quarter, but it still managed to surpass market expectations.
A Reuters poll of economists had projected a growth rate of 5.00%, indicating that the actual economic performance was marginally stronger than anticipated by analysts.
The measurement of the nation’s Gross Domestic Product (GDP) on a non-seasonally adjusted, quarter-on-quarter basis also showed an easing trend, with growth slowing to 1.43% for the July-to-September period, according to Statistics Indonesia.
This third-quarter performance occurred amidst a challenging domestic backdrop, as the period included significant anti-government protests that turned deadly in various parts of the country, beginning in late August and continuing into September.
Such social instability typically poses a risk to economic activity and investor confidence.
To counter potential economic slowdown and inject momentum into the economy, the government had previously launched a substantial stimulus package in June, valued at Rp 24.44 trillion, or approximately $1.5 billion.
The aim of this fiscal intervention was to fortify key sectors and maintain consumer and business spending, contributing to the final GDP result.
Resilience Shown Amidst Trade and Social Challenges
The marginal deceleration in the growth of the nation’s GDP suggests a degree of resilience in the face of both domestic unrest and challenging global trade conditions.
The third quarter’s economic narrative was notable for the sustained growth in exports, which recorded positive expansion every month from July through September.
This consistent performance in the external sector is particularly noteworthy because it occurred even as a significant trade barrier was imposed.
A 19% tariff on U.S. imports originating from Indonesia took effect in August, a measure that might have been expected to severely dampen export volumes and revenue.
The ability of the Indonesian export sector to overcome this substantial tariff hurdle and continue its growth trajectory indicates underlying strength and diversification in the country’s trade partnerships and export offerings.
Furthermore, the government’s strategic deployment of the multi-trillion rupiah stimulus package, announced in June, likely played a role in bolstering domestic demand and partially offsetting any negative impacts from the social protests.
The slight easing of the annual GDP growth rate, while a deceleration, remains well within the robust range for an emerging economy, demonstrating that the foundation of Indonesia’s economic activity—including consumption and investment—remained broadly sound throughout the politically sensitive third quarter.
Maintaining growth momentum requires careful policy management, especially regarding trade-offs between fiscal stimulus and managing external economic pressures.
Focusing on Policy Management and Future Growth Drivers
The final official GDP figures for the third quarter underscore the complex environment managed by Indonesian policymakers during the period.
The better-than-expected performance relative to the Reuters poll indicates that measures taken to support the economy, such as the stimulus package and ongoing infrastructure spending, are having a positive effect.
The government’s success in achieving export growth despite the new US tariffs serves as a key indicator of external sector competitiveness.
However, the slight quarterly and annual deceleration suggests that sustaining growth above the 5% level will continue to require proactive policy adjustments.
Analysts will be closely watching how the government manages the remaining tranches of the stimulus package and whether additional measures will be needed to accelerate economic activity in the final quarter and into the next year.
Future economic expansion will hinge not only on global commodity prices and trade dynamics but also on domestic factors, including the containment of social unrest and the effective, timely execution of key investment projects.
The strong performance of exports, a crucial component of Indonesia’s overall GDP calculation, will need to be maintained through continued market diversification and strengthening of trade ties with non-US partners to mitigate risk from any further protectionist measures.
