Indonesia: 2021 GDP surprised to the upside – UOB

Economist at UOB Group Enrico Tanuwidjaja and Yari Mayaseti comment on the latest GDP figures in Indonesia.

Key Takeaways

“Indonesia’s economy expanded by 5.02% y/y in 4Q21, a notable increase from previous quarter which grew by 3.51% y/y and above the market consensus of 4.90%. Sequentially, Indonesia’s economy advanced by 1.06% q/q in 4Q21. Acceleration of the vaccination process and significantly lower COVID-19 cases have allowed for the economy to be reopened more durably during the Sep-Dec 2021 period, lifting growth above expectations. Overall, the economy grew 3.7% in 2021, higher than our forecast of 3.5%.”

“From the expenditure side, 4Q21 economic growth was well supported by the rise in government expenditure, investments as well as net exports of goods and service that grew by 33.00% q/q, 4.96% q/q and 3.90% q/q respectively. In terms of sectoral view, economic growth is mostly supported by 5 sectors that include manufacturing, agriculture, wholesale and retail, construction as well as mining and quarrying. Meanwhile, health and social services as well as transport and storage also expanded in 4Q21.”

“Higher than expected 4Q21 growth was also well reflected in the mobility indicator level that recently rose compared to the pre-pandemic level as well as the strengthening of Indonesia’s Purchasing Manager Index (PMI) that reached 53.5 in Dec 2021, a slight decline from 53.9 in Nov 2021.”

“Going forward, we believe that economic recovery will continue in 2022, as domestic demand (household and government consumption as well as investment demand) is likely to continue to expand respectably while contribution of exports is likely to remain strong, albeit more so in 1H22. On balance of all accounts, we are forecasting 2022 baseline growth forecast within a range of 4.7% to 5.3%.”