Indonesia's Q1 GDP growth outperforms with election, holiday boost

Indonesia's economic growth saw an upswing in the first quarter of 2024, with a reported 5.11% year-on-year increase, marking the highest growth in three quarters and exceeding some analysts' expectations. The growth was largely driven by heightened government spending in the lead-up to the presidential election, as well as increased household expenditure during the Ramadan and Eid al-Fitr holidays.

Despite concerns from experts about the reliability of Jakarta's official data for assessing economic performance, the figures released by Statistics Indonesia show a slight improvement from the 5.04% expansion in the same period the previous year. However, the country's economic expansion comes amid challenges such as a decline in commodity exports over the past year and a dip in investment growth to 3.79% in Q1 from 5.02% in the prior quarter. The Indonesian central bank's recent interest rate hike to 6.25%, the highest in seven years, is a response aimed at supporting the rupiah in the face of tightening monetary policy and weak commodity demand.

On the global front, Asian stocks rose following a dovish stance by the U.S. Federal Reserve and cooler-than-expected U.S. jobs data, which spurred speculation of rate cuts later in the year. The Indonesian rupiah firmed after the Q1 GDP data surpassed forecasts. For the remainder of 2024, the Indonesian government targets an economic growth rate of 5.2%.