Indonesia’s 4Q24 GDP rose 5% in 4Q24, taking full year 2024 growth also to 5%, in line with our forecast. Consumptio moderated late last year, reflected in softer sentiments, retail sales and consumption loan growth, while holiday-related demand was a counterweight. Political handover in October impacted disbursements, with gross capital formation slowing from 4.3% in 3Q to 2.1% in 4Q. Lift in the demand from non-profit institutions demand (NPISH) was not material despite regional/provincial polls in 4Q. Contribution from net exports was negative for a second consecutive quarter. Looking ahead, domestic demand is likely to be the main driver of growth into 2025, with the goods trade surplus benefiting from better volumes. Supportive macroprudential measures by way of tax allowances on house purchases, minimum wage hike, easing inflation, and measures to boost lending growth to key sectors have been timely. Discount on electricity tariffs in Jan pulled inflation down sharply from 1.6% yoy in Dec24 and 0.8% in Jan25, slowest in two decades.
BI has resumed rate cuts, with fiscal policy geared towards consumption, via social assistance for vulnerable households, free meal program and extension of fuel as well as electricity subsidies. Decision to defer the VAT rate increase prevented further pressure on household incomes. Record high FDI inflows and resilient exports benefiting from downstreaming sector activity, are other support factors for headline growth. We count on a pick-up in trend growth to 5.1% in 2025. Key risks are a re-escalation in trade disputes and increase in protectionist stance amongst trading partners.
Onshore markets looked past the growth data release, drawing cues from the US dollar and broader risk-uptake. In midst of a temporary tariff calm and sideways move in the USD index, USDIDR settled within 16250-16400 range. IDR 10Y yield returned to sub-7% levels mirroring a correction in the UST rates, benefiting also from signs that the incoming government will stay prudent on fiscal matters. President Prabowo reportedly asked ministries and regional governments to trim wasteful expenditure by IDR 307trn (more than a percent of GDP), likely to make room for stimulus spending and to avoid deterioration in the fiscal math.
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