JAKARTA, Aug 5 (Reuters) – Indonesia’s year-on-year economic growth hit 5.29% in the second quarter, slower than the previous quarter but better than expected, official data showed on Wednesday.
The median growth forecast in a Reuters poll for Southeast Asia’s biggest economy was 5.10% for the April-June quarter. GDP grew 5.61% year-on-year in the January-March period.
Resource-rich Indonesia has posted annual growth of around 5% in most quarters since the COVID-19 pandemic, with growth momentum usually building around the Eid festive season, which this year fell in the first quarter.
But while the pace of growth looks to have picked up since late 2025, Indonesia has battled a crisis in investor confidence this year stemming from worries about government overspending as the government races to meet President Prabowo Subianto’s goal to raise growth to 8% before the end of the decade.
Markets are also anxious about the potential downgrade of Indonesia’s equity market status by index provider MSCI, as well as the central bank’s independence following the surprise resignation of Bank Indonesia Governor Perry Warjiyo last week.
The rupiah currency is currently trading near record lows against the dollar and the stock market has lost nearly 30% so far this year.
In the second quarter, manufacturing, agriculture and construction expanded, while the mining sector contracted due to mining quota restrictions.
Shielding consumers from rising energy prices caused by the Iran war has led to increased government spending on fuel subsidies.
Activity in coming quarters could be hit by the impact of a rate rise by BI of 100 basis points over May and June, aimed at attracting capital inflows to support the rupiah.
(Reporting by Gayatri Suroyo, Fransiska Nangoy, Stefanno Sulaiman, Bernadette Christina; Editing by David Stanway)
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