Indonesia economy loses steam in Q2 amid US-China trade war

Indonesia posted its slowest rate of quarterly growth in two years on Monday as Southeast Asia's biggest economy feels the sting of US-China trade tensions.

Growth weakened to 5.05 per cent in the April-June period as exports and investment slipped. That was down from a 5.27 per cent expansion in the same period last year.

Indonesia is grappling with weaker prices for key commodities like coal and palm oil, as the global economy falters on the back of US President Donald Trump's intensifying trade war with China.

"The challenges we're facing are not easy to overcome due to a significant slowdown in the global economy," said statistics agency head Suhariyanto, who goes by one name.

The sagging growth serves up a fresh challenge to Indonesian President Joko Widodo, who was re-elected earlier this year largely on his infrastructure-driven bid to energise the economy.

But he failed to hit a promised seven-percent target during his first term and could struggle to lift the economy off its current level, analysts said.

"Monthly indicators show signs of moderating domestic demand and against the backdrop of renewed escalation in trade tensions between the US and China, the outlook for Indonesia's exports remains bleak," research house Oxford Economics said in a report.

Last month, Indonesia cut interest rates for the first time in nearly two years in a bid to rev up the economy.