The gross domestic product of Southeast Asia’s largest economy climbed 3.69% from a year earlier, government data showed today, bouncing back from a 2.07% contraction in 2020. The finance ministry had previously forecast growth at 3.7%.
Annual household consumption, which makes up over half of Indonesia’s GDP, grew 2.02% year-on-year, recovering from a 2.63% decline in 2020.
But the figure is still below the pre-pandemic trend of 5% annual GDP expansion.
Meanwhile, the country’s fourth-quarter GDP, also released today, showed a year-on-year growth rate of 5.02%, accelerating from the third quarter as daily Covid cases dropped dramatically from highs during the summer. This was higher than the median forecast of 4.90% by 17 economists polled by Reuters.
GDP growth is expected to accelerate this year, but concerns remain as Indonesia enters a third wave of Covid-19 driven by the highly transmissible omicron variant. Daily new cases have risen close to 30,000 in recent days, compared to below 300 at the start of the year.
“Our economy is very dependent on how the government and all of us contribute to breaking the chain of the spread of Covid-19,” Margo Yuwono, head of the country’s statistics agency, said today. “If contagion decreases, mobility is good, the economy will be [positively] affected.”
The UK’s Capital Economics said in a memo today that Indonesia’s economic recovery is “now entering a more difficult phase”, adding that drags on the economy will come from falling commodity prices and a tighter monetary policy.
“[A] boost to exports from high commodity prices looks set to reverse this year, if as we forecast, prices fall back in 2022. Fiscal policy is also likely to be tightened,” economists at the firm said, noting that the government is sticking to its plans to cut the budget deficit to 3% of GDP by 2023.
“Our forecast is for above-trend and above-consensus growth of 6% this year. But this would still leave the economy around 5.5% below its pre-pandemic trend by year-end,” they added.
The International Monetary Fund in its World Economic Outlook update in January lowered its forecast for Indonesia’s 2022 GDP growth rate to 5.6%, from the 5.9% touted previously, while cutting its 2023 prediction to 6.0% from 6.4%.