Indonesia’s economy expanded faster than expected in the second quarter, with robust household spending and investment providing a cushion from a challenging global backdrop. The rupiah gained.

Gross domestic product (GDP) rose 5.29% from a year earlier, Indonesia’s statistics agency said in a briefing on Wednesday. That compares to the 5.14% median estimate in a Bloomberg survey and the 5.61% posted in the first quarter.

In terms of production, all industries expanded except for mining, according to Edy Mahmud, deputy for National Accounts and Statistical Analysis. Manufacturing, agriculture, trade, construction, and mining remained the biggest contributors to the economy, accounting for 64% of GDP. 

The rupiah extended gains to 0.6% while stocks and 10-year government bonds held earlier increases.

Southeast Asia’s largest economy has proven resilient even as a prolonged Iran war spurs energy prices and weighs on commodity exports. Still, Bank Indonesia’s currency defence has also led to 100 basis points of interest-rate increases, which risk crimping borrowing and investment.

The rupiah dropped 5% last quarter — by far the worst performer in the region — as investors fretted over President Prabowo Subianto’s economic policies and a possible downgrade of Indonesia’s equities and credit rating outlook.

The government aims to accelerate GDP growth in the second half of the year to meet its 6% target for 2026 — a level not hit since 2012. While it’s earmarked some US$1.5 billion (RM6.14 billion) in economic incentives, it has limited space to ramp up spending and the central bank’s rate hikes may tighten financial conditions.