Beyond the expectation of pessimistic observer consensus, Indonesia's annual economic growth in the second quarter of 2023 grew by 5.2%, above estimates. Economic growth accelerated to its highest level in three quarters, supported by strong household and government spending. The government plans to increase the allocation of state budget spending starting this quarter to achieve the 5.3% growth target for 2023. Separately, the Finance Ministry projected that GDP growth would be around 5.1% this year, highlighting the risks of a global economic slowdown impacting exports and investment. The result of the global economic evaluation by the Minister of Finance and Governor of Bank Indonesia at the G20 India are a benchmark for pessimistic conditions in 2023. Economists expect Indonesia's economic growth in the first quarter at around 4.93%, but economy grew 5.17% in the April-June quarter from the same period a year earlier, above the first quarter’s growth of 5.04%. Economic growth this is still slightly restrained by Indonesia's interest rate hike of 225 basis points from August 2022 to January 2023. Household consumption, which makes up more than half of GDP, increased 5.23% year-on-year in the latest quarter, the fastest pace since the third quarter of 2022.
Bank Indonesia as a monetary policy maker seems to have to focus them from growth to the current account, as strong domestic demand usually leads to an increase in imports. However, in the future, we still have to be aware of the current account deficit. With the economy resilient and domestic demand resilient in the shadow of the global crisis, many economic observers are of the view that Bank Indonesia will keep interest rates on hold and continue to prioritize external stability, with the possibility of easing later this year. In the current situation, the Government must also make efforts to secure sufficient food supply to mitigate the risk of food price inflation due to drought due to El Niño.
