Indonesia recorded economic growth of 1.50% QoQ and 4.95% YoY for the third quarter of 2024, marking the slowest growth since 3Q23 and remaining slightly below market expectations of 5.00%. Household Consumption continues to be the primary growth driver with a YoY increase of 4.91%, though this was a slight decrease from the previous quarter’s 5.05%. Fixed Investments grew at a robust 5.51% YoY, accelerating from 4.43% last quarter, largely driven by infrastructure development projects and increased government spending. In trade, Indonesia’s exports rose by 9.09% YoY, while imports saw a stronger increase of 11.47% YoY.

Source: Badan Pusat Statistik Indonesia

Sectoral Highlights

The Transportation & Warehousing sector experienced significant growth of 8.64% YoY driven by rising public mobility across all modes of travel alongside an increase in the domestic delivery of goods and services. The Accomodation & Food Beverage sector also expanded by 8.33%, fueled by domestic tourism and national events. The largest contributing sectors to economic growth, however, were Manufacturing, Farming, Trade, Construction, and Mining. 

Simpan Views

Weakened Household Consumption

Recent GDP figures reflect a softening in Household Consumption growth over the past three quarters, pointing to a decline in purchasing power, especially in the period following the Eid holidays. However, with a dovish approach from major central banks globally, growth prospects appear promising. On the domestic front, upcoming local elections, the Christmas and school holiday season, and heightened year-end government spending are expected to bolster economic activity, helping Indonesia meet its 5% growth target. However, the new government holds an essential task of stimulating household consumption in order to drive economic growth in 2025. 

How’s Our Portfolio Looking?

We remain optimistic with our equity selections within the Sustainable Equity Fund, where the portfolio remains concentrated in the commodities and banking sector. Our investment strategy is aligned with anticipated China stimulus measures and expected rate cuts from the Fed and Bank Indonesia, positioning the portfolio to benefit from these key factors over the long term.

In our Money Market funds, we have adjusted the Simpan Cash and Cash Syariah Fund portfolios by placing time deposits with longer maturities at banks offering high interest rates. This approach enables us to lock in yields in anticipation of further rate declines. For the Simpan Bond Fund, we continue to favor mid-to-long duration bonds, which are well-positioned to gain from ongoing rate cuts and generate capital gains.