Sat, May 06, 2017 - Page 10 News List

Indonesian growth picks up in first quarter

SUBDUED:The economy grew 5 percent as the prices of some food exports, such as tea and shrimp, climbed, but falling coal and palm oil prices weighed on growth


Indonesian economic growth accelerated slightly in the first quarter on improving exports, official data showed yesterday, but the outlook for a recovery in Southeast Asia’s top economy is subdued.

The economy grew 5.01 percent year-on year in January to March, slightly up from the previous quarter’s 4.94 percent, the Central Statistics Agency said.

Exports surged 20.8 percent from a year ago and 1.33 percent from the previous three months, said agency chief Suhariyanto, who goes by one name.

The increase came on the back of a jump in the prices of some food exports, such as tea and shrimp, the agency said, while improving conditions in key destinations, such as China and the US, also helped.

However, consultancy Capital Economics Ltd said falling prices of coal and palm oil — key Indonesian exports — were weighing on growth.

“With commodity prices likely to stay relatively depressed and credit growth set to remain weak, we expect growth to remain stuck at around 5 percent over the next couple of years,” Capital Economics’ Gareth Leather said.

Growth in Indonesia has been stuck at about 5 percent for the past three years, below the 5.8 percent average recorded over the past decade, the London-based consultancy said.

In other news, the Reserve Bank of Australia (RBA) raised its growth forecast for the next fiscal year, but tipped no interest rate moves for this year owing to uncertainty surrounding consumer spending.

The Australian central bank said it expected the economy to expand between 2.75 and 3.75 percent in the year to June next year, up 25 basis points from its February forecast on expectations of a sharp increase in liquefied natural gas (LNG) exports.

“Year-ended [GDP] growth is expected to pick up as the drag from mining investment comes to an end and the ramp-up in resource exports continues,” the RBA said in its quarterly Statement of Monetary Policy.

“LNG exports are expected to continue to grow strongly over the next few years, contributing around 0.5 percentage point to GDP growth in each of 2017 and 2018,” it said.

The RBA on Tuesday left the cash rate at a record-low of 1.5, while March quarter headline inflation hit 2.1 percent, returning to the bank’s target of 2 to 3 percent.

It said in yesterday’s statement that increases in underlying inflation — which strips out volatile items and is more closely watched by the central bank — over the next year or two would be “quite gradual” because of low wages growth.

“Although it seems unlikely that wage growth will slow much further, wage pressures are expected to pick up only gradually, as the effects of structural adjustment after the mining investment boom — which have weighed on wage growth — continue to wane,” it added.

It also cautioned on the outlook for consumer spending on the back of high household debt. Australia has a household debt-to-GDP ratio second only to Switzerland, according to the Bank of International Settlements.

“If indebted households believe that their prospects for income growth have weakened, they could choose to pay down debt faster and consumption growth could be lower than forecast,” the RBA said.

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