By Rahul Trivedi
BENGALURU, Aug 3 (Reuters) – Indonesia’s economy likely lost some momentum in the second quarter as consumer demand slowed after the festive season and net exports provided less support, according to a Reuters poll of economists.
Southeast Asia’s largest economy is expected to have expanded 5.10% year-on-year in the April-June quarter, below the 5.61% growth recorded in the first quarter, based on a poll of 28 economists conducted between July 27 and August 3.
On a quarter-on-quarter basis, gross domestic product was forecast to grow 3.50%, rebounding from a slight contraction in the January-March period.
Official data will be released on Wednesday.
“We have consumption slowing, partly because of the festive season drag, but also because fiscal policy support for consumption has not been that strong,” said Lavanya Venkateswaran, senior ASEAN economist at OCBC Bank.
Retail sales declined 3.7% in April and 3.9% in May, marking the steepest year-on-year contractions in three years, pointing to weakening domestic consumption.
Meanwhile, net exports provided less support despite higher commodity prices, as the energy import bill surged in April and May amid the U.S.-Iran war. Official data showed Indonesia recorded a $1.61 billion trade deficit in May, its first in six years.
“Compared with regional peers, Indonesia’s export growth has not been as strong. So we expect this to continue to be a drag in the second quarter,” added OCBC’s Venkateswaran.
Government spending was expected to remain supportive of growth, although economists said its contribution would moderate after a near 22% surge in the first quarter.
Authorities have allocated 381.3 trillion rupiah ($21.20 billion) for energy subsidies aimed at shielding households from higher fuel and electricity costs stemming from the war in the Middle East.
A separate Reuters poll showed Indonesia’s economy is predicted to broadly maintain growth of around 5% in the coming quarters, despite a surge in energy prices and 100 basis points of interest rate hikes by Bank Indonesia since May in a bid to support the rupiah, which is still down over 7% for the year.
“While credit growth remained robust, this was unlikely to fully offset broader signs of cooling activity,” said Krystal Tan, an economist at ANZ.
“Looking ahead, the recent tightening in financial conditions, external uncertainty and still-cautious private sector sentiment are likely to limit the pace of growth.”
Economists warned headline growth masked a widening divide across income groups and was well below President Prabowo Subianto’s 8% growth target by 2029.
($1 = 17,990 rupiah)
(Reporting by Rahul Trivedi; Polling by Susobhan Sarkar and Pulkit Khanna; Editing by Sonali Paul)
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