Indonesia’s economic growth slipped to its weakest in over two years, broadly meeting expectations, data showed on Tuesday, signalling more monetary and fiscal stimulus is on the cards over coming months to spur demand knocked by a global slowdown.

Gross domestic product rose 5.02% in the three months ended September from the year-ago quarter, the weakest pace since the second quarter of 2017, the statistics bureau reported.

The figure was close to the 5.01% growth expected in a Reuters poll and compared with the 5.05% expansion in the second quarter.

Though Indonesia - Southeast Asia’s largest economy - relies more on domestic demand, its growth has also been hurt by slowing global trade as the US-China tariff dispute shattered its exports. That in turn has dented consumer sentiment and overall domestic consumption.

Some economists said the data pointed to a need for further fiscal and monetary stimulus.

“We think policymakers will want to utilize all possible instruments at hand to support growth,” said Bank Danamon economist Wisnu Wardana, noting that all “productive engines” in the economy decelerated.

The fiscal policy imperatives would be under scrutiny given the central bank had already been cutting rates, he said. Bank Indonesia (BI) has cut interest rates four times by a total of 100 basis points since July and is expected to ease again in coming months.

ANZ analysts said while the data backed its expectation of further monetary easing, GDP growth was likely to stay stuck around 5% without a rebound in commodity prices or global growth.

The rupiah firmed up slightly after the data from 14,020 a dollar to 14,005. The main stock index climbed to 6,219 before the midday break, from 6,201 ahead of the announcement.

President Joko Widodo, who won re-election in April promising more investment opportunities, is under pressure to avoid a sharp downturn.

However, Widodo, who has been warning his cabinet members of the risks of a global recession, has little headroom to open the fiscal spigot as government income has been hit by weak corporate earnings and the broader slowdown.

In the third quarter, growth in household consumption, which makes up over half of Indonesia’s GDP, eased slightly to 5%, from 5.2%. Government spending and investment also slowed. Exports were flat, while imports plunged. At his inauguration last month, Widodo reiterated his ambitious plans of making Indonesia one of the world’s top five economies by 2045 with a GDP worth $7 trillion.

“To do that, investment must play a much bigger role. Data suggests a long way to go, with contribution to growth at its lowest in three years,” said OCBC economist Wellian Wiranto.

Reflecting lowered expectations, Finance Minister Sri Mulyani Indrawati in August cut the 2019 GDP growth outlook to 5.08%, compared to a target of 5.3%.

On Monday, Indrawati said the fiscal deficit would be allowed to widen to 2% of GDP this year, up from 1.84% originally planned, due to revenue pressures.

BI Governor Perry Warjiyo has already flagged room to make policy more accommodative, while a Reuters poll conducted before BI’s last meeting on Oct. 24 forecast one more 25-bp rate cut by the end of the first half of 2020.

After the data, ING’s senior economist Nicholas Mapa said the central bank will probably “reserve ammunition for further stimulus if growth momentum sags further.”

The government aims to lift GDP growth to 5.3% in 2020, a target some economists say is too optimistic.  Meanwhile, Lion Air is targeting a flotation of up to $1 billion in the first quarter of 2020, several sources close to the matter said, as the Indonesian airline resumes growth after a year dominated by the fatal crash of one of its Boeing 737 MAX jets.

The budget carrier, which had been awaiting an official report on last year’s crash before making key decisions including a long-delayed initial public offering, is hoping to fund future aircraft deliveries to service an improving market.

Last month’s Indonesian accident report focused on flaws in Boeing cockpit software, while recommending better training at Lion Air and improved US and local regulation.

“The Indonesian market is finally showing signs of stability. This is a good time to tap the market,” one individual with knowledge of the plans said. The sources all declined to be named as they are not authorised to speak to the media about the IPO, which would involve Lion Air’s core Indonesian airline and could rank as one of the biggest floats in Indonesia.

A Lion Air spokesman in Jakarta declined comment.

Reuters