Economic Update Indonesia: Impressive 5.72% Growth Rate Recorded in Q3-2022

Despite the challenging international conditions (aggressive monetary tightening in the United States, the Russo-Ukrainian war, stagflation, a looming recession across the West, and weak growth in China) and a significant rise in the prices of subsidized fuels on 3 September 2022, Indonesia posted another solid economic growth rate.

Based on the latest data from Indonesia’s Statistical Agency (Badan Pusat Statistik, BPS), the Indonesian economy expanded by 5.72 percent year-on-year (y/y) in Q3-2022. It is a result that is better than most analysts had predicted.

It is even a better performance than in Q2-2022 when the Indonesian economy grew at an upward revised growth rate of 5.45 percent (y/y), which was the quarter when the country enjoyed the traditional peak in consumption amid the Ramadan month and Idul Fitri celebrations. Meanwhile, on a quarterly basis, the Indonesian economy expanded 1.81 percent (q/q) in Q3-2022 thanks to impressive exports, strong direct investment, and a sharp increase in government spending.

Although it is very important in the context of Indonesia’s economic growth, we are not going to discuss the state of the global economy in this article because we offer these analyses in our monthly reports. However, we do emphasize that Indonesia’s key trading partners (China, US, Japan and the European Union) have experienced a challenging Q3-2022. And while this is not really reflected in the latest data, we are concerned that weak growth in these countries will affect the Indonesian economy more profoundly in the period ahead (perhaps starting from Q4-2022).

When we take a look at Indonesian GDP in current and constant prices (the latter being adjusted for inflation, and thus a better way to measure true growth), we can see a structurally rising trend after Indonesia hit rock bottom in Q2-2020 during the COVID-19 crisis (see tables 3 and 4 below).