Tue, Feb 07, 2012 - Page 10 News List

Indonesia GDP expands fastest since 1996

INVESTMENT:Gains in investment, particularly after ratings upgrades by Moody’s and Fitch, are expected to bring in foreign investment to help support growth

Bloomberg

Indonesia’s economy grew last year at the fastest pace since before the Asian financial crisis as rising investment and domestic spending countered a slowdown in export demand due to Europe’s debt crisis.

GDP rose 6.46 percent last year, the statistics bureau said in Jakarta yesterday, after a revised 6.2 percent gain the previous year. The economy expanded 6.49 percent last quarter from a year earlier.

Southeast Asia’s largest economy has outperformed neighbors, including Thailand and the Philippines, as two rate cuts in the last quarter aided Indonesian President Susilo Bambang Yudhoyono’s efforts to boost GDP by an average 6.6 percent a year. The country regained investment-grade ratings from Moody’s Investors Service and Fitch Ratings after 14 years in recent weeks, boosting investment prospects as it plans transport and utility projects.

“Indonesia remains the standout in Asia,” said Chua Hak Bin (蔡學敏), a Singapore-based economist at Bank of America Merrill Lynch. While growth will probably ease to about 6 percent this year on weaker external demand, “robust consumer spending and strengthening infrastructure and foreign investment will support growth,” he said.

The nation’s currency has advanced about 1 percent against the US dollar this year after the Moody’s and Fitch upgrades. The rupiah traded little changed at 8,988 per US dollar as of 11:13am in Jakarta yesterday.

The country’s growth last year was the fastest since 1996, according to IMF data. The US$707 billion economy has expanded more than 6 percent for five straight quarters, showing it’s weathering a decline in global demand that has hurt growth across Asia.

South Korea’s economy grew the least in two years last quarter and China reported last month its weakest expansion in 10 quarters. Philippine GDP rose 3.7 percent in the fourth quarter from a year earlier, while Thailand’s grew 3.5 percent in the third quarter. Singapore’s economy shrank in the fourth quarter from the previous three months.

“Indonesia’s economy is still resilient amid the global slowdown even as other countries in Asia have started contracting,” Destry Damayanti, chief economist at PT Bank Mandiri, said in Jakarta yesterday. “To minimize the impact of the global slowdown, the government needs to push state spending as it won’t be healthy if we push private consumption to boost the GDP further.”

Yudhoyono plans to boost government capital spending by 19 percent to 168 trillion rupiah (US$19 billion) this year to improve infrastructure, such as railways, airports and roads. Indonesia’s parliament approved in December a land-acquisition bill that will allow the government to accelerate projects.

Investment in the three months ended Dec. 31 rose 19 percent from a year earlier, according to the Investment Coordinating Board. For last year as a whole, investment gained 21 percent from a year earlier.

Suzuki Motor Corp, the third-biggest carmaker in Indonesia, will spend ¥60 billion (US$782 million) to increase capacity in the Southeast Asian nation, including setting up another factory to build engines, it said last month.

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