Indonesia 3Q21 GDP Review
Indonesia’s economy expanded 3.51% YoY in 3Q21. The domestic real GDP growth decelerated from the previous quarter at +7.07% YoY. The output growth was also below our estimate and consensus forecast at +3.59% YoY/+3.88% YoY. The slowing pace of output expansion was attributable to tighter social restriction amid second wave outbreak of Covid-19 during 3Q21. The implementation of PPKM Darurat has hit hard transportation and service sectors while at the same time boosting healthcare and ICT industries. From expenditure sides, the aggregate demand equation improved and boosted by international trade that recorded a significant expansion on annual basis. Noted that global supply and demand imbalance has boosted commodity price to soar. As commodity exporting country, Indonesia benefitted from a recent rally of commodity prices from energy to food staples. Exports jumped outpacing imports triggering a trade balance surplus.
Remained Favorable Macro & Financial Conditions in 3Q21
Despite the slowing growth of GDP, we noted that several macro indicators remained favorable. Here we highlighted some of domestic macro and financial condition during 3Q21 :
• Indonesia trade balance surplus increased from USD6.31bn to USD13.24bn in 3Q21 due to higher exports outpacing imports amid commodity boom.
• Inflation remained stable and benign below central bank’s target of 2- 4% amid higher and a more persistent inflationary pressure globally during 3Q21.
• Manufacturing activities (Markit Manufacturing PMI > 50) and consumer sentiment (Consumer Confidence Index nearing 100) bounced back in Sep-21 following loosening of social restriction.
• Banks credit grew positively during the entire 3Q21 as demand and supply of credit picked up. Banks credit expanded from 0.5% YoY in Jul-21 to 2.21% YoY in Sep-21.
• Domestic financial markets improved as JCI rose by 4.68% driven by foreign flows; 10-year Indo GB yield dipped >30 bps driven by banks increase in holding of tradable government bond and IDR value appreciated 1.37% against USD supported by ample FX reserves and narrowing CAD.
Looking Ahead : Light at the End of the Tunnel
We expect Indonesia’s GDP to expand more than 5% YoY in 4Q21 on the back of positive catalyst including : 1) higher mobility due to improving pandemic situation; 2) acceleration of government spending in the last quarter; 3) continued banks credit expansion as well as 4) surging commodity price that boost exports.
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