Solid growth facing a downside risks for stability
Key Takeaways
• Indonesia’s GDP grew +5.44% YoY in 2Q22, above consensus/MNCS estimate at +5.17%/+5.22% YoY.
• Such impressive growth was driven by raising HH consumption and exports amidst : 1) improving mobility; 2) favorable macro condition; 3) holiday & festive momentum as well as 4) the windfall effect from commodity boom.
• Challenge remains on higher than expected inflation with : 1) higher mobility coupled with high oil price; 2) extreme weather to cause supply shock; and 3) pass on higher input cost as domestic economy continue to strengthen.
• Pressure on IDR has caused domestic CB to intervene reflected by the drops in FX reserves (-USD4.2bn MoM) with imports coverage declined to 6.2 months in Jul-22 (vs 6.6 months in Jun- 22).
• We expect BI to raise benchmark policy rate by +25 bps thus Aug-22 to stabilize the IDR and managing inflation.
• Expecting a more normalized growth in 2H22 on the back of rising inflation and potentially lower trade surplus due to commodity prices moderation.
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