Domestic Demand Sustains Economic Growth in Q3/2018 - Bank Sentral Republik Indonesia
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May 25, 2019

No. 20/ 84 /DKom   

Indonesia’s national economy grew by 5.17% (yoy) in the third quarter of 2018 on the back of domestic demand. The data points to stronger domestic demand in the reporting period, with growth increasing from 6.35% (yoy) in the second quarter of 2018 to 6.40% (yoy). In contrast, the external sector contributed negatively to the national economy as export growth faded against persistently high imports in response to domestic economic growth momentum. In turn, negative net exports undermined domestic economic growth in the three months to September 2018, slipping from 5.27% (yoy) recorded in the second quarter of 2018.

In terms of spending, most domestic demand driving economic growth stemmed from investment and government expenditure. Investment growth accelerated to 6.96% (yoy) from 5.86% (yoy) in the previous period, edged up by building and non-building investment. In addition, the government was more inclined to spend, with expenditure hitting 6.28% (yoy) growth in the third quarter of 2018, namely the highest level recorded since 2016. Conversely, household consumption moderated slightly to 5.01% (yoy) in the reporting period from 5.14% (yoy) previously. Solid domestic demand maintained high import growth at 14.06% (yoy) despite decelerating from 15.26% (yoy) in the previous period. On the other hand, export growth slumped from 7.63% (yoy) to 7.52% (yoy) in the reporting period.

Several economic sectors were key contributors to robust economic growth in the third quarter of 2018. The primary sector posted gains on a strong mining sector and despite subdued agricultural performance. The secondary sector also improved, led by a solid manufacturing industry that was buoyed by exports of several key commodities, including chemicals as well as iron and steel. The tertiary sector enjoyed balanced growth in line with increasing domestic demand. Furthermore, government administration services, corporate services and health services were a major boon to other services. In contrast, the trade sector, accommodation and food services sector as well as the construction sector achieved moderate gains.

Bank Indonesia welcomes the key role of investment in terms of catalysing domestic demand and supporting economic growth.  Looking ahead, Bank Indonesia is avowedly committed to sustaining economic stability and strengthening the mix of monetary policy with fiscal and structural policies. Furthermore, the current policy direction is oriented towards providing solid foundations for ongoing efforts to maintain balanced and sustainable economic growth moving forward. Jakarta,

5th November 2018
Communication Department

Executive Director



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