Indonesia 3Q GDP growth of 5.7% came in above consensus expectations says Maybank IB, mainly due to firm investment and robust exports. The country’s household consumption, however, softened despite last year’s low base. GDP however rose by +5.7% on a year-on-year basis, the fastest pace in 5 quarters, while expanding by +1.8% from the previous quarter. Third quarter real GDP came in +5.6% higher than pre-pandemic levels.
On the expenditure side, household consumption eased slightly despite last year’s low base (due to Delta wave), likely reflecting the impact of the fuel price hike in early September which weighed on consumer confidence and retail sales. Expenditure on food & beverages and household equipment slowed, offsetting the uptick in transportation & communication and restaurant & hotel.
On the other hand, gross fixed capital formation accelerated mainly due to the surge in investment in machine & equipment and vehicles, which outweighed the slowdown in buildings & structures.
This is in line with the jump in foreign direct investment in 3Q driven by downstream projects including nickel and copper. Government consumption fell for the third straight quarter as the government continued to cut back on Covid relief programs. Net exports of goods & services remained robust as exports accelerated on strong demand for commodities and a tourism rebound.
On the supply side, the reopening tailwind boosted growth in consumer-related sectors including transportation & storage, accommodation & food services, and wholesale & retail trade. Public admin and education services rebounded after 2 quarters of decline, while momentum eased in real estate, finance & insurance, and infocomm.
Manufacturing and agriculture picked up in 3Q, while mining & quarrying and construction moderated.
Given the better-than-expected GDP performance year-to-date, particularly in investment and exports, Maybank IB raised its 2022 GDP growth forecast to +5.3% (from +5%) and maintains its 2023 GDP growth forecast at +5.1%.
The banking group also expects BI to hike by a smaller +25bps in the upcoming meeting on 17 Nov to support domestic demand, after two straight meetings of +50bps hikes.
