Economic growth slows in Q3

Downtick falls in line with expectations: Indonesia's GDP increased 5.0% on a year-on-year basis in Q3, following a 5.1% expansion in the previous quarter. Q3’s figure roughly matched market expectations, as well as the average growth rate seen in the post-pandemic era.

Drivers: Compared to the previous period's data, readings in Q3 softened for private consumption (+4.9% on a year-on-year basis vs +5.0% in Q2), fixed investment (+5.0% vs +7.0% in Q2), exports of goods and services (+9.9% vs +10.9% in Q2) and imports of goods and services (+1.2% vs +11.5% in Q2). In contrast, the reading for government consumption improved in Q3 (+5.5% vs -0.3% in Q2). Q3’s data points to persistently weak domestic demand due to downbeat consumer confidence and sluggish construction activity, despite populist programs and stimulus measures under the Prabowo administration. Moreover, the headline GDP growth reading was flattered by a stronger contribution from net exports, stemming from a sharp deceleration in imports—consistent with muted domestic activity.

Panelist insight: Nomura analysts commented on the outlook: “Taking into account the Q3 outturn, we raise our full-year 2025 GDP growth forecast to 5.0% from 4.8%, steady from 5.0% in 2024. With Q3 growth bringing the year-to-date average of 5.0% y-o-y, our new forecast pencils in a moderation to 4.9% in Q4, driven by the same factors that have kept domestic demand conditions from improving meaningfully so far this year. These include the sustained weakness in household sentiment, in part due to still-subdued labor market conditions, while stimulus packages announced by the government are likely to be small, given fiscal constraints. While government underspending is likely to reverse, we still forecast sluggish investment spending growth, due to lingering uncertainty in the operating environment.”

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