MACROECONOMIC ANALYSIS SERIES: Indonesia Economic Outlook Q2-2023

Indonesia has managed to get through episodes of inflationary pressure, high commodity prices, global monetary tightening, and value chain disruptions rather splendidly. Economy grew by 5.31% (y.o.y) for overall 2022 after recording higherthan-expected growth at 5.01% (y.o.y) in Q4-2022. The persistent notable performance of economic growth was supported mainly by the solid domestic demand following the manageable public health situation and robust production activity stemming from commodity windfall. It is reflected in the sectoral figure with the growth of the biggest sector contributor to GDP, manufacturing industry, which has reached 4.89% (y.o.y) in 2022 and marked as its highest annual growth rate since 2013. Looking into the subsector of manufacturing industry, the significant growth of manufacturing industry was driven by its major contributor, the manufacturing of FnB. The double-digit growth of manufacturing of machinery and equipment and basic metal has also accelerated the growth of manufacturing industry and reflected the solid production activities in Indonesia throughout 2022. On the spending side, solid household consumption annual growth rate of 4.93% (y.o.y) and investment growth of 3.87% (y.o.y) have both contributed significantly to robust GDP growth. All the expenditure components grew positively in Q4-2022, except for government spending with its negative growth of 4.77% (y.o.y) in Q4-2022 due to lower health and social spending for Covid-19-related stimulus.