So far, so good
In the midst of a deteriorating perception of Indonesia's economy, the country posted an encouraging Q4 2024 GDP growth result, at 5.02% Y/Y. This was higher than the 4.95% annual growth for the previous quarter. On a Q/Q basis, the Indonesian economy expanded by 0.53%, which followed the regular cycle. With the rate of growth in Q4 slightly above 5%, overall economic growth for full-year 2024 was 5.03%. This rate of growth was slightly below the rate of growth for 2023, which stood at 5.05%.
The fastest sector of growth in Q4 2024 was "other services", up 11.36% Y/Y, followed by business services, which grew by 8.08%. On the expenditure side, the largest growth took place in consumption expenditures of LNPRT (the consumption expenditure component of non-profit institutions serving households), which grew by 6.06%.
The improvement of the economy in Q4 was accompanied by a smaller deficit in the current account for that quarter. While in Q3 2024, the current account registered a deficit of $2,008 million or 0.56% of GDP, in Q4 the deficit narrowed to $1,145 million or 0.32% of GDP. At the same time, the financial and capital account of the balance of payments in Q4 2024 recorded a large surplus of $8.5 billion. The smaller deficit in the current account combined with a large surplus in the financial account led to a large surplus in the overall balance of payments for Q4 2024.
For full-year 2024, Indonesia's balance of payments registered a surplus of $7.2 billion. For the year 2024 the current account registered a deficit of $8,856 billion or 0.1% of GDP, while the financial and capital account registered a large surplus, leading to an overall surplus in the balance of payments, with foreign exchange reserves ending December 2024 at $155,719 million.
The Central Board of Statistics reported the balance of trade data for January 2025. Exports were down by 8.56% M/M to $21,452 million, with non-oil exports lower by 6.96%, to $20,395.1 million. At the same time, imports also fell, by 15.18%, to $18,000.2 million, resulting in a trade surplus of $3,451.8 million. This was another large surplus, but lower than that of the previous month.
Inflation in January was reported at a decline of 0.76% M/M, leading to a Y/Y rate of inflation of 0.76%. With that performance, yearly inflation was below the the lower part of the target corridor of the Central Bank. Given that background, Bank Indonesia decided to keep the benchmark interest rate constant at 5.75% at its meeting of the Board of Governors on February 18-19, 2025.
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