Indonesia’s surprisingly good GDP has analysts doubting the data

Harry Suhartono & Grace Sihombing / Bloomberg05-29

At a forum over the weekend in Jakarta, some of the country’s best-known economists openly questioned the credibility of the most recent data.(May 29): Economists are increasingly doubting Indonesia’s...

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The event, hosted by Alliance of Indonesian Economists, was highly unusual in Indonesia, where economists rarely hold public press briefings to dispute data. \nThe discussion highlighted widening unease among academics and technocrats, as well as within banking and finance, over the reliability of official statistics, as well as broader concerns about policymaking under Prabowo’s administration.\nThe Government Communications Agency (GCA) on Friday defended the data and the statistics office, officially known as Badan Pusat Statistik, and disputed the economists’ interpretations of the figures.\n“Scrutiny is welcome, but it should be based on careful reading of data,” GCA said in an emailed response to questions. The first quarter data “is supported by a broader set of real-sector signals”.\nQuestions about the data follow other moves by Prabowo that have eroded investor confidence and cast doubt on guardrails put in place since the Asian Financial Crisis. \nThe former general, who came to power in October 2024, has sought to take control of the country’s natural resources, created a sovereign wealth fund that reports directly to him and ousted officials seen as more fiscally conservative and investor-friendly. \nLast week, Prabowo stunned traders and investors with an announcement that the wealth fund, Danantara, would take over exports of the country’s main commodities. \n\n“In an era full of uncertainty like today, investors need certainty — including certainty about the accuracy of government data,” Wijayanto Samirin, a former adviser to senior government officials and academic, said during the economists’ forum. “Without it, trust will disappear, and economic crises often emerge because trust disappears.”\nSeveral economists, publicly and privately, have questioned the accuracy of the recent official data. Two from the University of Indonesia published a report that called the latest GDP figures “questionable as a measure of economic health”.\nThe authors, Mohammad Ikhsan and Teuku Riefky, point to several anomalies in the data, leading on a disconnect between electricity use and manufacturing. They also flagged a 25-fold jump in the value of inventories, which “almost certainly does not reflect rational economic behaviour”.\n“If the electricity supply contracted, such manufacturing growth is difficult to justify on physical grounds,” they wrote, referring to the 1% decline in power activity compared to a 5% jump in manufacturing. “Logically, both cannot be correct.” The economists estimate 4.6% to 4.9% is “more realistic” headline GDP figure. \nThe GCA said this interpretation is “too mechanical”, citing both a base effect year-on-year and increasing industrial reliance on independent power supplies not captured by official statistics. \nThe report also warned that temporary factors such as Eid-related spending and government cash disbursements, as well as a “questionable” inventory adjustment may have inflated the headline figure, masking what it described as a weakening structural growth trend since 2022-2023.\n\nThe GCA attributed the surge in inventories to front-loading behaviour. “Firms often adjust production and inventory positions ahead of major policy or tariff changes,” it said, an apparent reference to US tariffs. \nThis is the second time in less than a year that official Indonesia statistics have raised doubts. Last August, after quarterly data showed the country grew the fastest in two years, the statistics office invited a number of local economists to provide clarification on several components of the data, according to several attendees, who asked not to be identified as the meeting wasn’t public. \nOf particular focus in that meeting was a sharp rise in gross fixed capital formation — basically, public and private investment in physical assets like infrastructure and equipment. The economists said the meeting didn’t fully alleviate their concerns since only the government had access to the relevant data. \n“It is normal and healthy for statistical authorities to engage with economists, analysts, and market participants to explain methodology and clarify unusual movements in the data,” the GCA said. The BPS didn’t respond to requests for comment. \nTo be sure, economists and market watchers have voiced doubts over the reliability of Indonesia’s official data for years as headline growth has consistently come in around 5%, outside of the pandemic. \n“That stability has long struck us as implausible, given Indonesia’s exposure to swings in global demand, commodity prices and policy cycles,” Gareth Leather, senior Asia economist at Capital Economics, wrote in a note earlier this month. \n“Given the government’s shift towards more populist and interventionist policymaking, and its willingness to undermine the guardrails of macro orthodoxy under President Prabowo, we are cautious about taking the strong first quarter figures at face value,” Leather wrote in the note. \nThe International Monetary Fund, when asked for comment, said, “Indonesia’s GDP statistics and data provision are broadly adequate for surveillance. As in many countries, there remains room for improvement.”\nStill, economists interviewed by Bloomberg said they are now turning to a much broader set of indicators — including vehicle sales, electricity consumption, tax receipts, credit growth and corporate revenues — to get a clearer reading on the economy.\nThe shift has been driven partly by Indonesia’s push to expand domestic nickel processing and build an electric-vehicle supply chain — a strategy that is far more capital- and energy-intensive than traditional household-driven growth.\nSome analysts argue that means growth is becoming less broad-based and increasingly concentrated in commodity processing, downstream industries and government-backed projects. \nA recent report by Indonesia’s statistics agency showed the country’s middle class has steadily shrunk since the pandemic, falling in 2024 to almost 48 million people, or about 17% of the population, from 57 million, or about 21%, in 2019.\nAnalysts say the trend reinforces concerns that headline growth is masking weaker purchasing power and rising economic insecurity among households that traditionally powered Indonesia’s consumer economy.\nUploaded by Chng Shear Lane","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"isVideo":false,"video":null,"symbols":[],"gpt_button":0,"need_auth":false,"need_login_tip":false,"code":"91000000","status":"200"},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"tenantId":"TBGLOBAL","deviceId":"web-server-community-laohu8-v3","version":"4.43.1","shortVersion":"4.43.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2639672486","isCrawlerRequest":true}