Indonesia's GDP growth slowest in 2 years

Its 6.1% growth is lower than consensus.

According to Nomura, Indonesia's GDP growth slowed to 6.1% y-o-y in Q4 from 6.2% in Q3, lower than consensus expectations of 6.2% but above our 5.8% forecast. This is nonetheless the slowest growth in more than two years. 

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However, looking beyond the headlines, the profile of the growth drivers is even weaker. All key components of domestic demand slowed, led by private consumption (5.4% y-o-y in Q4 from 5.6% in Q3), government expenditures (-3.3% y-o-y in Q4 from -2.8% in Q3) and investments (7.3% in Q4 from 9.8% in Q3). 

These components slowed more than we expected, contributing 4.5pp to GDP growth in Q4 (from 5.2pp in Q3). On the external front, export growth improved by 0.5%y-o-y from -2.6% in Q3 while import growth rebounded by 6.8% y-o-y (from -0.2% in Q3), resulting in a larger negative contribution of net exports (-2.5pp in Q4 from -1.2 in Q3).

The main surprise to us was inventories, which contributed a substantial 3.1pp to headline GDP growth. After contributing 2.1pp to headline GDP in H1, we expected some inventory de-stocking in H2.

Statistical discrepancy also contributed 1pp to Q4 GDP growth. Stripping out statistical discrepancy and inventories, GDP growth slowed sharply to 1.9% y-o-y in Q4 from 4.0% in Q3. 

The sector-wise breakdown was quite mixed. GDP growth strengthened in manufacturing (6.2% from 5.9% in Q3) and services (5.3% from 4.5%), while agricultural sector growth eased to 2.0% from 5.3% in Q3.

Growth in mining and quarrying remained weak, increasing 0.5% y-o-y in Q4 from -0.3% in Q3 (versus 2.9% in H1), consistent with our view that the string of policy announcements last year has already impacted the sector.