Indonesia’s economy grew more than expected in the April-to-June period, official data showed yesterday, thanks to a boost in consumer spending during Ramadan and surging state spending.
While the result is below the government’s annual target, analysts said it could indicate that Southeast Asia’s biggest economy might finally be pulling out of a long slowdown.
The 5.18 percent year-on-year expansion beat forecasts of about 5 percent and was also higher than the previous quarter’s 4.92 percent.
Fueling the jump was a pickup in manufacturing activity and a surge in consumer demand during the Muslim holy month, which fell mostly in June, Statistics Indonesia said.
Consumers in the world’s most populous Muslim-majority country typically splash out on expensive foods and clothes during the holy month of Ramadan.
The April-to-June period saw a 36 percent jump in government spending from the previous quarter, while Indonesia President Joko Widodo, commonly known as Jokowi, has also pushed a major infrastructure program and launched a tax amnesty aimed at luring back to the country billions of dollars of undeclared income.
The central bank in June cut interest rates for a fourth time this year in a bid to stimulate growth.
“The outlook for Indonesia’s economy has improved in recent months, raising hopes that the economy could be on the cusp of a sustained recovery,” Capital Economics Ltd economist Gareth Leather said.
Growth in the resource-rich nation has been slipping in recent years, due mainly to a slowdown in demand for its key commodity exports — such as coal and precious metals — particularly from Asian powerhouse China.
Last week, Jokowi appointed leading reformist Sri Mulyani Indrawati, who had until recently served as a World Bank managing director, as minister of finance in a Cabinet reshuffle.
However, growth is still well below Jokowi’s annual target of 7 percent and Leather urged more action to build on recent measures aimed at attracting more overseas investment.
“Although recent steps to open up the economy to foreign competition are welcome, Indonesia still has a long way to go if it is to turn around one of the most protectionist business environments in the region,” he said.
Capital Economics forecast Indonesia’s economy would grow about 5 percent this year and next.
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