The Indonesian Economy Is Predicted To Grow 5.04 Percent In The Second Quarter Of 2023

JAKARTA - The growth of Indonesia's Gross Domestic Product (GDP) is projected to reach 5.04 percent on an annual basis (yoy) in the second quarter of 2023. Indonesia's GDP growth data will be officially released by the Central Statistics Agency (BPS) on August 7, 2023.

"Our forecast shows that GDP growth for the second quarter of 2023 reached 5.04 percent yoy, showing a slight change from the 5.03 percent yoy growth rate observed in the first quarter of 2023," said Bank Mandiri senior economist Faisal Rachman quoting Antara.

On a quarterly basis, Faisal also estimates that GDP for the second quarter of 2023 will increase by 3.74 percent (qoq), recovering from a negative growth rate of -0.92 percent of qoq seen in the first quarter of 2023.

Throughout the first half of 2023, GDP growth is predicted to reach 5.04 percent yoy, down from 5.25 percent yoy growth recorded in the first semester of 2022.

The slowdown could be attributed to a global economic slowdown amid global inflation and a steadily high global interest rate policy rate for a longer period of time.

Faisal assessed that GDP growth in the second quarter of 2023 was mainly driven by strong household consumption and increased government spending.

Household consumption is expected to experience a significant increase after the end of the pandemic, so that community mobility increases.

In addition, the downward trend in inflation and the positive seasonal impact of Eid al-Fitr and Eid al-Adha celebrations further support consumer spending.

After the end of the pandemic, the Government took a more pro-growth stance. With the increase in fiscal space through the elimination of pandemic handling programs and the APM program, the government seems to be actively pursuing growth-oriented spending to boost the economy.

In addition, the performance of Gross Fixed Capital Formation (PMTB) will still be restrained due to the investment factors of structure and buildings. However, there is a promising prospect for acceleration during the second semester of this year, mainly driven by the acceleration of the National Strategic Project (PSN).

By referring to these indicators, Faisal hopes that Indonesia's economy will remain resilient amid sluggish global economic growth in the remainder of 2023.

"We still estimate that the source of Indonesia's economic growth will most likely shift from the external sector to the domestic sector in 2023. Export activities are projected to weaken in line with the slowdown in the global economy, thus becoming a challenge for the performance of the country's external sector," said Faisal.

On the other hand, domestic consumption is expected to remain strong, supported by improved community mobility factors, declining inflation, and solid fiscal conditions.

"Overall, our projection shows a moderate easing in Indonesia's economic growth for 2023, with an estimated 5.04 percent, compared to 5.31 percent achieved in 2022," he concluded.