Indonesia Macro Update - GDP Growth 05 Nov 2024
KBVS MACRO UPDATE
Tuesday, 5 November 2024
The Constraint on Domestic Demand Growth
Indonesia's economic growth for 3Q24 reached 1.50% QoQ or 4.95% YoY, slightly below expectations (Cons: 1.58% QoQ or 5.00% YoY; KBVS: 1.56% QoQ or 5.01% YoY; Prev: 3.79% QoQ or 5.05% YoY). On the expenditure side, growth was primarily supported by household consumption, which, while still positive, decelerated slightly to 4.91% YoY (Prev: 4.93% YoY). From a production perspective, improvements were seen in the Manufacturing sector, which grew to 4.72% YoY (Prev: 3.95% YoY), and in the Construction sector, which rose to 7.48% YoY (Prev: 7.29% YoY).
Looking ahead, we anticipate that the largest boost will come from an increase in domestic demand, supported by (a) social assistance programs aligned with the campaign promises of the Prabowo-Gibran administration, (b) the upcoming regional elections in November, (c) a potential improvement in the prices of Indonesia’s main export commodities, particularly coal and palm oil, which could enhance the Agriculture, Forestry & Fisheries, and Manufacturing sectors, as well as Export and Household Spending components on the expenditure side, (d) stable inflation expectations, with inflation potentially closing below 2% YoY by the end of 2024, and (e) lower funding costs due to recent cuts in the domestic BI Rate. However, it is crucial to remain vigilant regarding geopolitical tensions and US fiscal policy approaches, which may weigh on export growth moving forward.
Regards,
KBVS Research Team