SCHATZ TECHS: (U5) Bearish Outlook

Q2 Indonesia GDP was stronger than expected rising 5.1% y/y up from 4.9% in Q1 and stronger than Bloomberg consensus at 4.8%. This result was back in line with Q4 after Q1’s dip and was driven by improvements across components. Bank Indonesia cut rates 25bp in July to 5.25% which brought the total easing this cycle to 100bp, which may now be providing some support to growth. Fiscal policy has also been stimulatory.

Indonesia GDP y/y%

• Risks to the growth outlook persist, especially from global factors and their impact on confidence. Indonesia’s government reduced its 2025 growth forecast to 4.7-5% from 5.2%. New fiscal measures are due to be announced on August 15.
• Private consumption growth picked up to 5.0% y/y from 4.9% and was stronger than implied by Q2 consumer confidence but this may weigh on spending in Q3.
• Private investment grew by 7% y/y, the highest in four years and up from Q1’s 2.1%.
• Government spending continued to contract in Q2 but at a slower rate of -0.3% y/y after -1.4%.
• Exports growth jumped to 10.7% y/y from 6.8% as shipments to the US continued to be frontloaded ahead of the revised early July deadline. Originally a “reciprocal” tariff of 32% was to be imposed on Indonesia but that has been negotiated down to 19%. With exports to the US concentrated in H1, there is likely to be payback in H2.
• USDIDR is little changed today at around 16385 but is still 0.7% higher than it was when BI last met.

Indonesia exports y/y%

Source: MNI - Market News/LSEG