INDONESIA GDP RELEASE: Q3 20171
Indonesia’s economy grew 5.1 percent yoy in Q3 2017, slightly faster than in Q2 (5.0 percent)
Gross fixed capital formation growth accelerated to 7.1 percent yoy (Q2: 5.3 percent) as machinery and
equipment investment picked up
Private consumption growth remained stable at 5.0 percent yoy from a high base as Lebaran was in Q3 2016
A jump in export growth likely met from destocking, with changes in inventories subtracting 1.3pp from growth
On the production side, growth was driven by an acceleration in the manufacturing sector (4.8 percent yoy,
contributing 1.1 pp to growth)
The Indonesian economy expanded at a modestly higher rate in Q3 2017. Real GDP grew 5.1 percent yoy, slightly faster
than in Q2 (5.0 percent) but below consensus forecasts (5.2 percent). Strong fixed investment growth and surging exports
were the main drivers of growth, offsetting the drag from significant inventory destocking (-1.3 percentage points of total
growth) (Figure 1). Government consumption also rebounded, although this was partly due to low base effects when compared
to Q3 2016. Exports surged on the back of higher commodity exports, but also due to low base effects due to the timing of
Lebaran in Q3 last year. A similar but smaller surge in imports led the contribution of net exports to growth to remain positive.
On the production side, the manufacturing and trade, hotel and restaurant sectors provided the largest contributions to growth
(Figure 2).
Fixed investment growth climbed to a four-year high. Gross fixed capital formation growth accelerated for a second
consecutive quarter to 7.1 percent yoy (Q2: 5.3 percent), the highest since March 2013 (Figure 3). This was mainly driven by a
strong turnaround spending on machines and equipment (15.2 percent; Q2: -2.2 percent), in line with the increase in nominal
capital goods imports (an average of 24 percent increase in Q3 2017). These imports were mainly linked to public infrastructure
investment (such as ships and floating structures) as well as machinery for mining and agriculture industries. Construction of
buildings and structures remained the main driver of GFCF growth, in line with the strong uptick in cement sales (an average
of 25 percent). Government capital expenditure on the other hand rose only by 1.7 percent (Q2: 0.5 percent) suggesting most
investments were undertaken by SOEs or the private sector.
Private consumption growth remained stable despite the high base from last year’s Lebar an festivities. Private
consumption grew at 5.0 percent yoy for the fifth consecutive quarter. Household consumption growth was stable at 4.9
percent. Given the high base from last year’s Lebaran festivities (which in 2016 were in Q3), stable growth is in fact a positive
signal and the quarter-on-quarter, seasonally adjusted and annualized data also indicates that private consumption growth
picked up to 5.5 percent (Q2: 4.8 percent qoq saar)2. This is consistent with the further easing of inflationary pressures to 3.8
percent (Q2: 4.3 percent), the relative stability of the Rupiah and strong labor markets (unemployment fell to 5.5 percent in
August 2017 from 5.6 percent in August 2016). Monthly consumption indicators, however, were mixed: although passenger
car sales and motorcycle sales picked up, retail sales growth decelerated (0.3 percent, Q2: 5.0 percent) and consumer confidence
mostly remained unchanged, albeit at high levels (Figure 4).
Government consumption rebounded to 3.5 percent yoy after contracting 1.9 percent in Q2 2017 . The pickup partly
reflected low base effects from expenditure cuts in Q3 2016, but also larger increases in nominal social spending (2.9 percent;
Q2: 1.5 percent), and a recovery in nominal material expenditures (3.2 percent; Q2: -2.9 percent). Personnel spending also
advanced in nominal terms (0.4 percent) as bonuses were distributed to civil servants. In Q3, government disbursements
increased by 5.7 percent from the previous year, compared to 2.8 percent in Q2.
Consistent with firming global trade and higher prices of Indonesia’s key export commodities, exports surged. Both
exports and imports registered double-digit growth for the first time since 2011-2012, increasing 17.3 percent yoy and 15.1
percent, respectively (see Figure 5 and Figure 6; Q2: 3.6 percent and 0.2 percent, respectively). This was partly due to low base
effects given the timing of last year’s Lebaran in Q3. The rise in export volumes was mainly driven by greater external demand
for Indonesia’s commodities such as coal and palm oil, as reflected by the increasing prices of these commodities. In value
terms, mineral fuels, mineral oils and distillation products increased by 34.5 percent and animal or vegetable oils/fats increased
by 34.6 percent. The rise in imports was also driven by non-oil and gas goods, especially raw materials and capital goods,
consistent with growth in the manufacturing sector.
1 Prepared by Pui Shen Yoong, cleared by Frederico Gil Sander and Derek Chen on November 8, 2017.
2 World Bank estimate; BPS data adjusted using X12 ARIMA.
Figure 1: GDP growth picked up slightly as fixed investment Figure 2: Manufacturing and trade, hotels and restaurants
and export growth accelerated drove growth
(contributions to growth yoy, percentage points) (contributions to growth yoy, percentage points)
Private consumption Government consumption Tax-subsidies Other services
Investment Net exports Financial services Transport & communication
Trade, hotel & restaurant Construction
Stat. discrepancy* Change in inventories Electricty, gas & water Manufacturing
10
GDP Mining & quarrying Agriculture
8 Total GDP
6
6 5
4 4
3
2
2
0
1
-2 0
-4 -1
Sep-14 Jun-15 Mar-16 Dec-16 Sep-17 Sep-14 Sep-15 Sep-16 Sep-17
Source: BPS; World Bank staff calculations Source: BPS; World Bank staff calculations
Figure 3: Machinery and equipment investments drove fixed Figure 4: Passenger car & motorcycle sales rose, but retail
capital formation sales dipped and consumer confidence was mostly flat
(contributions to growth yoy, percentage points) (yoy, percent/3mma yoy, percent, LHS; consumer confidence index; RHS)
Buildings & Structures Machine & Equipment
Vehicles Other Equipments 30 130
Passenger Car
Cultivated Bio. Res. Intellectual Property Sales
7 20 Consumer 120
6 Confidence Index
5
10 110
4
3 Retail Sales Index
2 0 100
1
0 -10 90
Motorcycle sales
-1
-2
-20 80
Sep-14 Sep-15 Sep-16 Sep-17
Sep-16 Jan-17 May-17 Sep-17
Source: BPS; World Bank staff calculations Source: BI; World Bank staff calculations
Note: Retail sales index in yoy percent terms; vehicle sales in 3-month
moving average (mma) percent yoy terms.
Figure 5: Total export growth surged as higher commodity Figure 6: Imports of non-oil and gas goods also led to
prices supported exports of non-oil and gas goods double-digit import growth
(contributions to real growth yoy, percentage points) (contributions to real growth yoy, percentage points)
20,0 Services 20,0 Services
Goods: Oil & Gas Goods: Oil & Gas
15,0 Goods: Non-Oil & Gas 15,0 Goods: Non-Oil & Gas
Export of Goods and Services Import of Goods and Services
10,0 10,0
5,0 5,0
0,0 0,0
-5,0 -5,0
-10,0 -10,0
Sep-14 Sep-15 Sep-16 Sep-17 Sep-14 Sep-15 Sep-16 Sep-17
Source: BPS; World Bank staff calculations Source: BPS; World Bank staff calculations
contributions to yoy growth, percentage
Indonesia Q3 2017 yoy, percent points
Q3 Q4 Q1 Q2 Q3 Q3 Q4 Q1 Q2 Q3
2016 2016 2017 2017 2017 2016 2016 2017 2017 2017
GDP 5.0 4.9 5.0 5.0 5.1
By Expenditure
Consumption 4.0 3.4 4.8 4.1 4.8 2.5 2.3 3.0 2.6 3.0
Private cons. 5.0 5.0 5.0 5.0 5.0 2.8 2.8 2.8 2.7 2.7
Govt. cons. -2.9 -4.0 2.7 -1.9 3.5 -0.2 -0.5 0.2 -0.2 0.3
Gross fixed capital
formation 4.2 4.8 4.8 5.3 7.1 1.4 1.6 1.5 1.7 2.3
Exports -5.6 4.2 8.7 3.6 17.3 -1.2 0.9 1.9 0.8 3.4
Imports -3.7 2.8 5.1 0.2 15.1 -0.7 0.6 1.0 0.0 2.7
Change in stocks 4.2 -47.1 13.9 0.8 -51.7 0.1 1.2 0.3 0.0 -1.3
Stat. discrepancy -1528.8 414.5 -43.9 -0.1 30.4 1.5 -0.5 -0.7 0.0 0.4
By Industry
Agriculture 3.0 5.3 7.1 3.3 2.9 0.4 0.6 0.9 0.5 0.4
Mining &
quarrying 0.3 1.6 -0.6 2.3 1.8 0.0 0.1 -0.1 0.2 0.1
Manufacturing 4.5 3.4 4.2 3.5 4.8 1.0 0.7 0.9 0.7 1.0
Electricity, gas
and water 4.7 3.1 1.8 -2.1 4.9 0.1 0.0 0.0 0.0 0.1
Construction 5.0 4.2 6.0 7.0 7.1 0.5 0.4 0.6 0.7 0.7
Trade, hotel &
restaurant 1.8 1.5 3.0 3.0 3.0 0.6 0.7 0.8 0.7 0.9
Transport &
communication 2.7 2.6 4.1 5.7 4.6 0.7 0.8 0.8 0.9 0.8
Financial services 2.5 2.8 3.7 4.5 4.3 0.6 0.4 0.5 0.5 0.5
Other services 3.9 2.9 3.7 2.6 4.0 0.4 0.3 0.3 0.2 0.4
Taxes & subsidies 22.4 26.7 9.4 23.3 5.8 0.8 0.9 0.3 0.7 0.2
Source: BPS; World Bank staff calculations