Indonesia's economy is maintaining steady rise momentum in the first quarter

May 10, 2022: According to the official data on Monday, a historic increase in commodity prices and relaxation of Covid-19 curbs helped Indonesia’s economy increase for a fourth straight quarter from January to March.

Southeast Asia’s biggest economy increased 5.01% in January-March from the previous year, compared to 5.02% growth in October-December. A median forecast by 19 analysts polled by Reuters was expecting 5.00% growth in the initial quarter.

Growth in the January-March period was supported by a recovery in consumption, investment, and exports. Increasing prices of global commodities such as coal, palm oil, and nickel also recorded high trade surpluses for Indonesia, a significant supplier of these resources.

Covid-19 restrictions imposed this year, which have been made easier, led to a strong pick-up in Indonesia’s economic activities, Margo Yuwono, head of Indonesia’s statistics bureau, told a news conference.

“Household consumption has improved, even for tertiary spending such as travels,” he further said.

But President Joko Widodo warned about inflation risks stemming from increasing global fuel and food prices, and supply chain disruptions made it even worse by the Ukraine war.

Analysts are citing geopolitical concerns as factors that could hamper growth.

“A few global risks that will affect the national economic recovery include geopolitical risks, the economic slowdown of China, and rising global inflation that has prompted a tightening of global monetary policy,” Josua Pardede, an economist at Bank Permata, said.

In the previous month, Indonesia’s central bank lowered its economic growth outlook to 4.5%-5.3%, from 4.7%-5.5% previously, which cited slower global growth and disruptions to trade.

Bank Indonesia (BI) wants to keep interest rates at record lows until it sees a lot of pressure on core inflation. It needs to review its monetary policy normalization plan from May to June and assess any risks to the government’s inflation outlook, changes in energy prices, and subsidies. The interest rate levels will be reviewed in the third quarter.

On a quarterly, non-seasonally adjusted basis, the economy contracted 0.96%, compared with 1.06% growth in October-December and a 0.89% decline forecast.