Indonesia's Victory Lap on Growth Is Hard to Watch

Indonesia is patting itself on the back for a respectable economic start to the year. But President Prabowo Subianto’s team would be wise not to overdo it. Markets aren’t expressing anywhere near the same comfort with the country’s trajectory.

There’s little room for complacency, let alone self-congratulation. The rupiah is regularly hitting record lows against the dollar. Only muscular intervention by the central bank is getting in the way of a sharper slide than the 3% tumble since the Iran war began. If the economy really was in fine shape, a 24/7 campaign to shore it up wouldn’t be required.

Finance Minister Purbaya Yudhi Sadewa, however, crows that Southeast Asia’s largest economy has clearly broken free from a curse. It expanded 5.6% in the first quarter from a year earlier — faster than expected and the most in three years, according to figures last week. Helped along by record government outlays, the performance is no small feat when you consider that the Iran crisis is constraining growth and pushing inflation higher in most economies. The long malediction, in his view, was the failure of successive administrations to accelerate beyond 5%, a clip that’s been remarkably consistent for most of the years since the 1997-98 Asian Financial Crisis.

To the cool-eyed, 5.6% for one quarter doesn’t seem a huge breakout, but there’s always the chance of a turning point. No one really thinks the double-digit growth that the archipelago experienced before collapsing into an IMF program and the downfall of longtime dictator Suharto will ever return. Still, if Indonesia was China, people would be recalling the quip from former Premier Li Keqiang, who was asked about the reliability of Beijing’s statistics. GDP is man-made, and only a reference point, he said. Concerns that numbers could be massaged were not allayed.