Indonesia’s 2Q23 GDP growth came in higher than expectation at 5.17% y/y or 3.86% q/q. The figure beat consensus forecast of 4.93% y/y and our forecast of just 4.8%, marking a back-to-back better-than-expected growth for the year and continuing optimism since the final quarter of last year. 

Positive contribution from all expenditure components continued to underpin the growth momentum. For the past quarter, all expenditure components grew at a faster pace than previous quarter, except for exports and imports. Sectorwise, most grew faster in 2Q23, most notably transportation and accommodation which continued to accelerate in the last 6 quarters, consistent with the reopening that has undone all the pandemic mobility and activity restrictions. Robust growth in these two sectors were also in line with fast recovering tourism sectors that drove occupancy rate higher. 

Indonesian economy continues to prove itself to be resilient amid rising global uncertainty, as it registered stronger than forecasted growth for two quarters in a row. Strong domestic consumption and earlier than expected rebound in government spending, as well as sustained expansion in investment expenditure in light of down-streaming efforts by the current government is likely to underpin another year of above-5% growth, yet again. We revise our GDP growth higher to 5.1% for 2023 from 4.9% previously on account of stronger-than-expected 1H23 GDP growth.