Q1 real GDP growth edged down to +5.1% y/y from +5.2% in Q4 2018. Fixed investment slowed down to a still robust +5% y/y (+6% in Q4) mainly as spending on transportation equipment shrank by -7%, likely because the government tried to rein in capital goods imports (and thus the current account deficit which widened in 2018). However, rising public consumption (+5.1% y/y, up from +4.6% in Q4) partly compensated for that while steady private consumption growth (+5.2%) was a stabilizing factor. External trade activity made a positive contribution to Q1 growth, but that is a deceptive signal as a disappointing export performance (-2.1% y/y) was outpaced by an even stronger drop in imports (-7.8%). Meanwhile, S&P has upgrade Indonesia’s long-term sovereign rating to BBB (with a stable outlook) from BBB-, citing the expected policy continuity and stability after President Widodo’s reelection and the resulting ongoing strong growth prospects as well as favorable public finances. Euler Hermes forecasts annual GDP to grow by just over +5% in 2019-2020.
