Indonesia misses growth target in Q1, economy expands at slowest pace in 3 years

Indonesia’s economy grew at its weakest pace in more than three years in the first quarter, with headwinds expected in the rest of the year stemming from global trade turmoil and declining household spending.

Southeast Asia’s largest economy grew 4.87% in the first quarter from a year earlier, its slowest rate since the third quarter of 2021 and down from 5.02% in the previous quarter. Growth was roughly in line with analysts’ forecasts in a Reuters poll at 4.91%.

Quarter-on-quarter, gross domestic product fell 0.98 percent.

The archipelago’s economic growth was largely supported by household consumption, the largest contributor to GDP expansion, as well as exports, Statistics Indonesia head Amalia Adininggar Widyasanti said.

Household consumption was helped by holiday spending with Ramadan and the Eid al-Fitr festival falling in March this year but still grew just 4.89 percent, down from 4.91 percent in the first quarter of last year.

The government has targeted the economy to expand by 5.2 percent this year, and President Prabowo Subianto had set an ambitious goal of eight percent growth by 2029.

Prabowo has introduced several controversial policies since he was sworn in last October, including free meal programmes that critics said put a huge burden on state coffers and massive cuts to government spending, triggering student protests across the country.

Economic activity is expected to weaken in the coming months on the back of sluggish exports, economists said.

“Indonesia is one of the least trade dependent economies in the region and we don’t think Trump tariffs will have a huge direct impact on the economy,” Capital Economics senior Asia economist Gareth Leather said.

“Nevertheless, Indonesia will still feel the impact as the recent decline in commodity prices weighs on export earnings.”