Tue, Feb 07, 2017 - Page 10 News List

Indonesian GDP growth less than forecast on cuts

STABILIZING:Domestic demand and a rise in commodity prices eased the fallout from last year’s government spending cuts to curb the deficit

Bloomberg

Indonesia’s economy expanded less than forecast in the fourth quarter of last year as government spending was curbed by a legal cap on the fiscal deficit.

GDP rose 4.94 percent in the fourth quarter of last year from a year earlier, the statistics bureau said in Jakarta yesterday; the median estimate of economists was for 5 percent growth GDP declined 1.77 percent in the fourth quarter from the previous three months.

Economists expected a contraction of 1.8 percent.

The economy grew 5.02 percent last year, matching forecasts.

Growth for 2015 was revised to 4.88 percent from 4.79 percent.

Government spending fell 4.05 percent in the fourth quarter of last year from a year earlier, while household consumption grew 4.99 percent

Southeast Asia’s biggest economy is still undershooting. Indonesian President Joko Widodo’s growth target of 7 percent amid a slowdown in China and lower commodity prices. That is even after the central bank cut rates six times last year in a bid to boost lending and growth.

While the economy is expected to pick up this year, with the IMF forecasting 5.1 percent growth, the Indonesian government is warning of headwinds from global uncertainty, including from policies being introduced by US President Donald Trump.

The recent rise in commodity prices has provided a strong terms-of-trade tailwind, said Weiwen Ng, an economist at Australia & New Zealand Banking Group Ltd in Singapore.

“This, along with a stabilization in domestic demand, has mitigated the negative impact that fiscal spending cuts — needed to minimize fiscal slippage in 2016 — have on Q4 growth,” Ng said.

The data are disappointing, with growth now expected to remain stuck at about 5 percent over the next couple of years, as policymakers run out of scope for further stimulus, said Gareth Leather, senior Asia economist at Capital Economics Ltd in London.

“The upshot of all this is that while growth is unlikely to slow further, we don’t expect it to accelerate either,” Leather said.

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