Tue, May 08, 2018 - Page 10 News List

Indonesian GDP growth disappoints, adding to woes Indonesian GDP growth disappoints, adding to woes

Bloomberg

Indonesia’s economy last quarter expanded at a slower pace than economists had forecast, a setback for the government after eight interest rate cuts in the past two years, while stocks and the currency fell.

GDP in the first quarter rose 5.06 percent from the same period last year, the Indonesian Central Bureau of Statistics said yesterday.

The median estimate of 23 economists surveyed by Bloomberg was for growth of 5.19 percent.

GDP fell 0.42 percent from the previous quarter, compared with economists’ estimate of a 0.3 percent decline.

Indonesia’s central bank has since the beginning of 2016 been cutting rates in a bid to spur growth in Southeast Asia’s biggest economy. While consumer spending has been sluggish, growth was supported last year by a pickup in exports.

Financial markets have been roiled in recent weeks, as higher US interest rates prompted outflows from emerging markets. That has closed the door on further easing by Bank Indonesia and raised the prospect of the first rate hike since November 2014, as policymakers look to protect a currency trading at its lowest since January 2016.

The rupiah yesterday extended its drop to a new 28-month low of 13,978 against the US dollar. Stocks retreated from a gain of as much as 1.2 percent.

While the weakening currency presents risks for economic growth, the government would look to sustain economic momentum by extending assistance to low-income groups, Indonesian Minister of Finance Sri Mulyani Indrawati said last week.

The government is forecasting growth of 5.4 percent this year.

Consumer demand continued to disappoint, with household spending rising 4.95 percent in the first quarter from a year earlier, little changed from the fourth quarter. Growth in government spending slowed to 2.73 percent from 3.81 percent in the fourth quarter.

“It continues the story of the previous four quarters, in which consumer spending was below expectations, and means there are downside risks to the government achieving its growth target of 5.4 percent for 2018,” PT Bank Central Asia chief economist David Sumual said.

The data complicates the central bank’s job, but Sumual expects policymakers are to follow through with a rate increase later this year. Bank Indonesia is set to announce a rate decision on May 17.

“The numbers from the consumer side of things are still below expectations and that’s why the central bank might think hard about their next step,” he said.

Rising oil prices and stronger global growth helped to support growth last quarter, the statistics bureau said.

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