Indonesia Q3 GDP slows to 4.94%; more tax breaks for home buyers announced
[JAKARTA] Indonesia’s finance minister on Monday (Nov 6) lowered the government’s growth forecast for 2023 to 5.04 per cent, from 5.1 per cent previously.
Next year’s growth is expected to come in slightly higher at 5.24 per cent, said Sri Mulyani Indrawati at a press conference, shortly after it was announced that the economy expanded by 4.94 per cent in the third quarter of 2023.
This was below the 5.17 per cent growth in the second quarter and a shade under the 5.05 per cent predicted by economists last week.
On a non-seasonally adjusted quarter-on-quarter basis, gross domestic product (GDP) expanded by 1.6 per cent in the July-September period. This was below economists’ expectations for 1.71 per cent growth.
Indonesia’s economy grew by 5.3 per cent in 2022, which was the highest level in nearly a decade as the country reaped the benefits of a global commodity boom.
In a report on Monday, OCBC analysts revised Indonesia’s growth forecast for 2024 to 4.8 per cent, from an earlier projection of 5.1 per cent.
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They said the anticipated weaker growth will be due to the delayed impact of monetary policy tightening, diminishing commodity tailwinds, and more cautious investment spending ahead of the presidential election next February.
At her press conference, Sri Mulyani announced new tax breaks for property purchases to boost Indonesia’s sluggish housing sector.
She said the government had decided to fully waive the value-added tax on home purchases priced under two billion rupiah (S$174,200) until June 2024. The discount will be 50 per cent from July until the end of 2024.
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The government will also allocate 7.9 trillion rupiah to extend a rice subsidy to assist 21.3 million lower-income households by six months, until June 2024. Indonesia is still facing a major challenge to import as much as 1.5 million tonnes of rice from other countries including India.
“This measure aims to mitigate the impact of rising rice prices caused by the El Nino-induced drought,” said Sri Mulyani.
The minister also announced a disbursement of 7.52 trillion rupiah in cash to 18.8 million registered lower-income families over the next two months.
“As the stimulus package takes effect this quarter, it is expected to contribute an additional 0.2 per cent to the overall growth this year,” she said.
Meanwhile, growth in household spending, which accounts for over half of GDP, slowed to 5.06 per cent in the third quarter, from 5.22 per cent in the previous three months.
Also at the press conference on Monday was Coordinating Minister for Economic Affairs Airlangga Hartarto, who said the ongoing Russia-Ukraine war and the Israel-Hamas conflict pose significant threats to global stability and could potentially lead to higher oil prices.
“The outlook for the global economy is slowing down. For now, the government will monitor the impact of global tensions on the domestic economy. We will explore other incentive strategies if uncertainties persist,” he said.
He added that while Indonesia’s economic growth has slowed, it is still stronger than many other countries.
“Our economic growth is higher than that of other countries, including China, Malaysia, the US and even Singapore,” he said.
Central Statistics Bureau head Amalia Adininggar Widyasanti said: “In the middle of the slowing global economy, climate change, and the falling price of main commodities, Indonesia‘s economic resilience is reflected in the (third quarter’s) 4.94 per cent economic growth.”
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