Indonesia Macro Update - GDP Growth 05 Feb 2025
KBVS MACRO UPDATE
Wednesday, 5 February 2025
The Economic Fundamentals in 4Q24 Remain Strong
Indonesia’s economic growth in 4Q24 came in slightly below our expectations, registering at 0.53% QoQ or 5.02% YoY (Cons: 0.47% QoQ or 5.02% YoY, KBVS: 0.54% QoQ or 5.04% YoY, Prev: 1.50% QoQ or 4.95% YoY). On the expenditure side, household consumption and gross fixed capital formation remained the primary drivers of growth, contributing 2.60% and 1.43%, respectively, to the overall expansion. From a sectoral perspective, the Manufacturing Sector remained the primary driver of economic growth, contributing 0.90% to overall expansion and registering a growth rate of 4.89% YoY in 4Q24.
Looking ahead, several factors are expected to support economic growth in 1Q25, including the ongoing electricity discount program, which runs until Feb ‘25 and could increase the likelihood of monthly deflation in the first two months of the year. Additionally, the rollout of the free nutritious meal program on Jan 1, ‘25, along with its additional budget allocation, the 6.5% average increase in the provincial minimum wage (UMP), and the seasonal momentum of Eid celebrations are expected to positively impact disposable income and consumer purchasing power. However, concerns over potential Trump tariffs and retaliatory measures from various countries may slightly hinder Indonesia’s export performance. Moreover, investor sentiment may remain cautious, leading to a wait-and-see approach in both portfolio and direct investment inflows. In this context, we anticipate that Bank Indonesia may consider opening room for a policy rate cut by the end of 1Q25 or early 2Q25 to stimulate domestic investment. As a result, we expect GDP growth to remain above 5.0% YoY in 1Q25 and 2Q25
Regards,
KBVS Research Team