(Bloomberg) -- Indonesia’s economy expanded slightly above forecast last quarter even as slower government spending puts the spotlight on President-elect Prabowo Subianto’s stimulus program when he takes office in October.
Gross domestic product rose 5.05% in the April-June period from a year ago, the statistics office said on Monday. That was faster than the median 5% increase seen in a Bloomberg News survey and compares with the 5.11% growth in the first quarter.
On a sequential basis, GDP grew a faster-than-forecast 3.79% from the previous three months when output had contracted.
While the third straight quarter of above 5% expansion underlines the resilience of Southeast Asia’s largest economy, sluggish government consumption puts the onus on the incoming leader to deliver faster growth that’s eluded incumbent President Joko Widodo. Prabowo is aiming for an 8% GDP expansion during his five-year term, more ambitious than the 7% that Jokowi had aspired for.
Indonesia will this month unveil its annual budget for 2025, with the spending plan likely designed to accommodate Prabowo’s priority programs, including free meals for students. It would also contain measures to spur economic growth, Finance Minister Sri Mulyani Indrawati told reporters on Monday, without elaborating.
The economy’s performance allows the central bank room to keep interest rates steady for a while to preserve currency stability, before pivoting to monetary easing later this year or in 2025. The rupiah climbed for a fourth day, strengthening along with other currencies in the region.
“With expectations of global interest rate reductions, especially by the more dovish Federal Reserve, Indonesia’s economic prospects for 2025 appear promising,” said Hosianna Evalita Situmorang, an economist at PT Bank Danamon in Jakarta.
Household spending, which accounts for over half of the national output, grew steadily at 4.93% from a year ago and almost matching the pace in the first quarter. Public consumption increased by only 1.42% last quarter from the nearly 20% expansion in the prior three-month period when the government distributed cash aid and boosted salaries of civil workers ahead of the February presidential vote.
Investment growth accelerated to 4.43% in the second quarter while exports recovered and halted a slump as global trade rebounded.
--With assistance from Eko Listiyorini, Norman Harsono, Shinjini Datta, Chandra Asmara and Soraya Permatasari.
(Updates with more details.)
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