Indonesia public spending rebound sets stage for stronger H2

Indonesia's economy posted 4.67% year on year growth in Q2. On a seasonally adjusted q/q basis, Q2 growth quickened to 1.4% from 0.8% in Q1. Consensus expected the economy to grow at 4.64%. Overall, the growth was driven by domestic consumption, albeit with marginally smaller contribution relative to Q1 (Q2: 2.56pp; Q1:2.65pp). 

Meanwhile, Q2 growth was also supported by an improvement in net exports, which added another 1.60pp (Q1: 0.32). However, the improvement masks a slightly concerning underlying trend of softer exports and imports, with the latter weakening by a wider margin. 

The weaker IDR, partly caused the import weakness, while delays in awarding government tenders (due to the January-April merger of the ministries of public works and housing, which controlled most of the public operating expenditure) further weighed on imports. Given the delays with restarting public spending, it added only 0.18pp to Q2 growth (Q1: 0.17pp) - less than half its normal contribution, says Barclays.