Category News : {2E3BF15A-CA11-48C7-88FC-C1420F492808} - Category 1;
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Government spending had been the main growth driver in H1-24, despite weak revenues and slow SBN issuance. While the global market conditions are set to improve in H2, its large financing gap would probably compel it to substitute some SBN issuance for loans.
- Government spending had been the main growth driver in H1-24, despite weak revenues and slow SBN issuance. While the global market conditions are set to improve in H2, its large financing gap would probably compel it to substitute some SBN issuance for loans.
- Liquidity from fiscal spending mostly accumulated in private non-financial corporations, with limited “trickle down” to households amid lack of recruitment in most labor-intensive sectors. While investment in capital-intensive areas (mining, metals, utilities) has remained strong, growth momentum is broadly slowing in manufacturing and construction.
- Household consumption is slowing after a euphoric Q1, but for two very different reasons. High-income households reduce their spending on big ticket items, and instead is saving more in SBN (but not bank deposits). Meanwhile, low-income households and SMEs are facing dwindling liquidity, making their consumption even more contingent on extraneous sources – loans from fintech, social spending, etc.
- The Rupiah’s weakness in Q2 was entirely predictable given the saving-investment (S-I) gap, but should stabilize in H2 as foreign inflows return to the SBN market. These inflows could not come soon enough, as the government’s large financing gap is starting to “crowd out” spending by other sectors.
- While GDP growth may only decline slightly in Q2 (to about 4.97% YoY), its NBB*-neutral growth potential – our estimated fastest rate at which Indonesia could grow without significant financing gap – has stuck around 4.2% for the past three quarters.
