(Feb 5): Indonesia’s economic growth surged to a three-year high as state stimulus buoyed domestic demand, potentially boosting sentiment after a recent slump in the rupiah and local stocks.
Gross domestic product (GDP) in the three months through December rose 5.39% from a year earlier, the nation’s statistics agency said on Thursday. That beats the 5.1% median estimate and marks the fastest pace since the 5.73% recorded in the third quarter of 2022, according to data compiled by Bloomberg.
Full-year GDP expanded by 5.11%, accelerating from 5.03% in 2024.
Stocks held a small gain of 0.1% after the data, while the rupiah maintained a 0.3% decline as the US dollar strengthened. The benchmark 10-year government bond yield was unchanged.
The government has ramped up efforts to lift growth that’s averaged 5% per annum over the past two decades towards President Prabowo Subianto’s goal of 8%. That has raised concerns the fiscal deficit will exceed the country’s self-imposed cap and erode its hard-won reputation for fiscal probity.
An additional US$1.8 billion in social assistance in the fourth quarter helped drive a rebound in household consumption. Investment also expanded at a faster pace, as Indonesia saw an expansion in manufacturing activity from October to December.
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All industries expanded in the fourth quarter, except mining, the statistics agency said. The largest contributions came from manufacturing, trade and agriculture.
The better-than-expected performance shows that Southeast Asia’s biggest economy is catching up with peers in the region. While fourth-quarter growth slumped to just 3% in the Philippines, Malaysia and Singapore both reported a 5.7% expansion in the period, while Vietnam’s economy grew at a blistering pace of 8.46%.
Finance Minister Purbaya Yudhi Sadewa said this week that Indonesia’s growth momentum continued to strengthen, defending the country’s fundamentals in the wake of the stock slump prompted by MSCI Inc’s warning about the investability in local stocks. He projected the economy could expand by 6% this year as the government mobilises fiscal, monetary and private-sector engines.
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The government has said it plans to accelerate spending early in 2026 to support purchasing power, including by disbursing more fiscal aid. Bank Indonesia is also expected to ease monetary policy further this year, while the government aims to foster investment growth via its new sovereign wealth fund Danantara.
Uploaded by Evelyn Chan
