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Indonesia economy likely grew 4.95% on year in Q1, contracted vs quarter

Reuters - May 3, 2023

Sujith Pai, Bengaluru – Indonesian annual economic growth likely slowed to its weakest in more than a year in January-March and shrank on a quarterly basis as lower commodity prices hit exports and higher interest rates restricted domestic demand, a Reuters poll found.

Southeast Asia's largest economy grew 4.95% in the first quarter from a year ago, according to the median forecast of 23 economists polled April 26-May 2. Gross domestic product (GDP) growth forecasts ranged from 4.23% to 5.20%.

The economy is also forecast to have contracted quarter-on-quarter for the first time in a year, by 1.0%, based on a smaller sample of 11 economists. That follows 0.36% growth in the October-December period.

The data will be released on May 5.

"GDP growth slowed in y/y terms in the final quarter of last year and we think that weakness continued into Q1. Lower commodity prices have weighed heavily on exports," noted Gareth Leather, senior Asia economist at Capital Economics.

"Looking ahead, we expect GDP growth to slow...as weak external demand and tighter monetary policy drag on output."

Growth was forecast to average 4.9% this year and 5.0% next, a recent separate Reuters poll found, slightly lower than the International Monetary Fund's estimates of 5.0% and 5.1%.

Exports from the resource-rich country rose to a record high last year on soaring global commodity prices, but shipments have gradually slowed on cooling global demand.

Exports dropped 11.33% in March from a year earlier to $23.5 billion, compared with 4.44% growth in February.

"As the commodity boom recedes, growth moderates and support for Indonesia's external and fiscal positions also diminishes," wrote Krystal Tan, economist at ANZ.

"It will be challenging for Indonesia to defy the global growth slowdown, but resilient domestic demand will help offer some buffer."

[Reporting by Sujith Pai; Polling by Madhumita Gokhale and Anant Chandak; Editing by Hari Kishan, Ross Finley and Bernadette Baum.]

Source: https://www.reuters.com/markets/asia/indonesia-economy-likely-grew-495-year-q1-contracted-vs-quarter-2023-05-03