Indonesia’s recent GDP data, released by Statistics Indonesia, reported the country’s fastest quarterly growth in two years, with a growth rate of 5.12% for the second quarter. This recent announcement has been met with a healthy dose of skepticism by a number of noted economists. They doubt the veracity of the numbers, particularly when looking at other economic indicators.
This second-quarter growth figure is a remarkable milestone and further indicates the strong rebound that Indonesia’s economy is experiencing. Yet, economists express concerns that this growth does not align with other critical economic statistics, as well as observable trends on the ground. They point to a slowdown in manufacturing activity and a marked decline in consumer spending as signs of an underlying economic strain.
As a number of economists pointed out, these inconsistencies between the GDP data and pretty much everything else happening in the economy should sound alarm bells. Among several exceptions, one significant example is the accelerating slowdown in manufacturing that usually foreshadows national growth trends. In addition, consumer spending, a crucial driver of economic growth, appears to be weakening, further complicating the narrative of a thriving economy.
Economists are quick to point to one major indicator, though — plummeting sales of cement. This critical global construction material is a frequent indicator of infrastructure and residential investment trends. Cement sales are dropping, a leading indicator of all construction going soft. If this trend continues, it will have profound impact on our economic growth in the future.
And as economists pour over the latest GDP numbers, they further doubt the strength of Indonesia’s economic rebound. That paradoxical situation of positive growth and yet other countervailing economic realities has created quite a bearish mood among many economists. They highlight the lack of disaggregated data to tell a better story about the true state of Indonesia’s economy.