Gross Domestic Product (GDP); Indonesia starts 2022 with solid economic growth rate

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While most macroeconomic indicators were indeed pointing towards a positive environment for economic growth in the first quarter of 2022, the threat of the Omicron wave which peaked in Indonesia in mid-February 2022 (peaking at nearly 65,000 hits positive tests per day) has occurred. Fortunately, this wave did not translate into significant numbers of people requiring medical treatment, so there was no need for the government to significantly step up existing social and business restrictions. Thus, economic activity was not too burdened in the first quarter of 2022, which is reflected in the GDP data.

Obviously, given the contraction of the Indonesian economy in Q1-2021, the weak base effect is also still in play, and therefore managed to push Indonesia’s rate in Q1-2022 to a level that is perhaps -to be slightly misleading in the sense that the economy has not fully returned to normal, despite the fact that the Indonesian economy generally posted growth rates of around 5% (y/y) in 2016-2019 ( see table 1 below). For example, the tourism industry is still miles from recovery, implying that Indonesia is losing billions of US dollars in foreign exchange earnings.

In short, what has supported Indonesia’s economic growth in Q1-2022 are in particular the following factors (these factors will be discussed in more detail below):

  • Indonesia’s export performance has been very strong thanks to high commodity prices (despite a slight decline in coal exports in January 2022 as part of the state intervention);
  • Household consumption has continued to recover in Indonesia as the threat of COVID-19 subsides (although not yet fully back to pre-COVID-19 levels);
  • Investment continued to recover in Indonesia on the expectation that there will be no need for tighter social and trade restrictions for the foreseeable future; and
  • The weak base effect as weak economic growth (actually: contraction) in the same quarter a year earlier facilitates a high growth rate in Q1-2022.

Take a closer look at the data

When we look at current prices and constant prices (adjusted for inflation with the BPS using 2010 as the base year), it is clear that the Indonesian economy was bigger in Q1-2022 than it expected. was in the corresponding quarters of previous years. So, in terms of size, the Indonesian economy has already recovered from the COVID-19 crisis (in fact, in terms of size, the Indonesian economy had already recovered last year).

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