Indonesia's Falling GDP Attributed to Decline in Household Consumption

Indonesia's gross domestic product (GDP) grew by 4.95% in the third quarter compared to the same period last year, marking the slowest growth rate in a year, as reported by the statistics bureau on November 5. This figure came in slightly below the 5% growth anticipated by analysts, representing a decrease from the 5.05% increase recorded in the second quarter. On a quarterly basis, the GDP saw a growth of 1.50%, which was also below the forecasted 1.59%. The deceleration was attributed to a slowdown in household consumption, which constitutes roughly half of Indonesia's GDP.

In the third quarter, household consumption rose by 4.91% annually, down from 4.93% in the previous quarter, with noted reductions in spending on items such as clothing and housing.

Conversely, investment experienced a more robust growth rate of 5.15% year-on-year, marking the fastest pace in a year, fueled by investments in the new capital city and other infrastructure projects. Additionally, government spending and exports also saw expansion during this period.

DBS Bank economist Radhika Rao commented that the third-quarter growth figures aligned with expectations, as increased investment and a rise in exports offset the weaker household consumption. Looking ahead, Airlangga Hartarto, Indonesia's chief economic minister, projected full-year GDP growth to hover around 5% and emphasized ongoing support for household consumption and investment to sustain economic growth through the end of the year.