By Stefanno Sulaiman and Fransiska Nangoy
JAKARTA (Reuters) -Indonesia’s economic growth decelerated slightly in the third quarter, official data showed on Wednesday, highlighting a challenge for the government to boost growth to 8% by 2029.
Growth slowed to 5.04% in the third quarter from 5.12% in the second quarter. That means the fourth quarter will be key if the country is to meet its full-year target of 5.2% and carry that momentum into 2026, which has a goal of 5.4% growth. President Prabowo Subianto has pledged to lift growth to 8% by 2029.
A Reuters poll had expected the economy to expand 5% in the third quarter, which included deadly anti-government protests across the country. In early September, pro-growth economist Purbaya Yudhi Sadewa was brought in to replace Sri Mulyani Indrawati, a conservative, as finance minister.
Growth in household spending, which makes up more than half of Indonesia’s gross domestic product, cooled slightly to 4.89% in the third quarter from 4.97% in the previous quarter, according to Moh. Edy Mahmud, a senior official with Statistics Indonesia.
While manufacturing, agriculture and trade contributed to third-quarter growth, mining – a key sector in resource-rich Indonesia – contracted, Edy said, which was attributable to a slump in global demand for coal and a drop in copper production in the Papua region.
He did not mention the Grasberg gold and copper mine run by Freeport Indonesia, but a mudflow disaster, which killed seven people, hit the mine, one of the world’s largest, in September. Operations have been halted since.
Investment grew 5.04% from a year earlier in the third quarter, decelerating from a four-year high of 6.99% in the previous quarter, supported by investment in machinery, Edy said.
Government spending was up 5.49% after logging a narrow contraction in the previous quarter. Meanwhile, exports were up 9.91% thanks to shipments of vegetable oil, steel and automotive products.
On a non-seasonally adjusted, quarter-on-quarter basis, gross domestic product growth eased to 1.43% in the third quarter, Statistics Indonesia said.
Airlangga Hartarto, Indonesia’s chief economic minister, said the country needed to step up efforts to boost the economy in the fourth quarter to achieve its full-year target.
“Our efforts in Q4 needs to be further intensified so that the average figure of 5.2% can be achieved (at year-end),” he told reporters.
The government unveiled a 24.44 trillion rupiah ($1.5 billion) stimulus package in June and exports grew every month from July to September even as a 19% tariff on Indonesian exports to the U.S. took effect in August.
The government has unveiled more stimulus worth nearly $3 billion for the fourth quarter, while Bank Indonesia cut rates in three successive meetings before taking a pause last month.
Airlangga said there was no need for more stimulus because the existing programme was sufficient, but analysts see further room for BI rate cuts.
“We don’t expect the BI to change its stance, keeping the door open for further rate reductions,” said Radhika Rao, a senior economist at DBS Bank, after the third-quarter data was released.
(Reporting by Fransiska Nangoy, Stefanno Sulaiman, Bernadette Christina and Stanley Widianto; Writing by Gibran Peshimam; Editing by David Stanway, Thomas Derpinghaus and Kate Mayberry)
