Indonesia’s economy has shown a growth rate of 5.11% in the first quarter of the year, surpassing economists’ expectations. The latest data released by the statistics bureau on Monday showcased a strong economic performance, driven by various factors including increased government spending and higher household consumption.
Economists had anticipated a growth rate of 5% for the January-March period. The economy’s growth is significant as it faced adversities such as declining commodity exports in the past year.
Government and Household Spending
The first quarter saw a significant increase in government spending, jumping nearly 20% annually compared to a growth rate of just 2.81% in the previous quarter. This increase was fuelled by campaign expenditure for the 14 February election as well as higher household spending during the Muslim holy month of Ramzan, which began in March.
Household spending, a crucial component of Indonesia’s GDP, also experienced high growth, expanding by 4.91% on a yearly basis. This was attributed to the festive atmosphere during Ramzan, leading to increased expenditures on food, beverage, transportation and communications.
Contractions in Investment and GDP
While government and household spending drove overall economic growth, investment growth decreased slightly in the first quarter. Investment expanded by 3.79%, down from 5.02% in the previous quarter, suggesting a more cautious approach from investors.
On a quarterly basis, GDP contracted by 0.83%, although this contraction was narrower than the forecasted 0.89%.
Government Outlook
Despite the strong first-quarter performance, the growth rate fell slightly short of the government’s forecast of 5.17%. Looking ahead, the government aims to achieve a growth rate of 5.2% for the year 2024.
Indonesian Rupiah
The positive GDP data had a ripple effect on financial markets, with the Indonesian rupiah strengthening against the US dollar. The benchmark stock index also witnessed gains.
Additional Information
- Highest first-quarter GDP growth prints were seen in the areas of Maluku, Papua and Sulawesi, mainly driven by the local mining and metal industry, as well as in Kalimantan.
- Indonesia’s unemployment rate fell to 4.82% in February from 5.45% a year ago. There were 7.2 million unemployed people, down from 7.99 million.
- Regional equities in Asia climbed on Monday after rallying last week as the U.S. Federal Reserve’s cooler-than-expected jobs data renewed wagers of rate cuts later in the year.
- Despite falling prices for key export commodities, Indonesia’s economy’s growth was supported by strong domestic economic activity, according to BPS acting head Amalia Adininggar Widyasanti.
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