Indonesia’s Economy Retained its Solid Growth Trend in Q1 of the Year

June 2022

Official figures show that a historic spike in commodities prices and the easing of Covid-19 limits helped Indonesia’s economy grow for the fourth consecutive quarter between January and March. South East Asia’s largest economy increased 5.01% from January to March of this year, compared to 5.02% growth from October to December of the previous year. A consensus projection by 19 analysts surveyed by Reuters had projected 5.00% increase in the first quarter.

In the January-March quarter, growth was backed by a recovery in consumption, investment, and exports. Rising global commodity prices, such as coal, palm oil, and nickel, also led to Indonesia, a key provider of these resources, posting large trade surpluses. Covid-19 limitations placed earlier this year, which have now been eased, have resulted in a significant increase in Indonesia’s economic activity, according to the head of Indonesia’s statistics bureau, who spoke at a news conference.

However, Indonesia’s President has warned of inflationary threats caused by rising global gasoline and food costs, and supply chain disruptions exacerbated by the Ukraine conflict. Analysts also noted geopolitical worries, China’s economic downturn, and growing global inflation as potential hurdles to the growth.

Last month, Indonesia’s central bank reduced its year-end economic growth forecast to 4.5-5.3% from 4.7-5.5%, noting weaker global growth and trade disruptions. Bank Indonesia (BI), which has committed to hold interest rates at record lows until it detects evidence of pressure on core inflation, plans to evaluate its monetary policy normalization strategy in May and June. They will also evaluate any threats to the inflation forecast if the government alters energy pricing and subsidies. It was previously said that interest rates would be revised only in the third quarter.

(Source: CNBC)

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