Nov 7, 2012

Indonesia - Indonesia's growth slows in Q3

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Indonesia's quarterly economic growth slowed for the first time in almost two years, but has kept above 6 per cent for the period, thanks to its continued strong domestic spending and rising investment.

Southeast Asia's largest economy grew 6.17 per cent from July to September, compared with the same period a year earlier, the country's statistics bureau announced yesterday.

Indonesia has so far been relatively insulated amid a weakening global economy, although declines in exports have been seen in recent quarters. But these have turned a corner, and data released last week shows the export sector improving slightly for the second month in a row.

However, it is feared that a prolonged global downturn will put further pressure on the prices of commodities such as palm oil, rubber and coal - all of which Indonesia exports globally.

Credit Suisse's Robert Prior-Wandesforde, who described the economic growth figure released yesterday as "not bad", wrote in his research note to clients that the third quarter's growth is the lowest registered in the past seven quarters.

Investment was the main driver of growth, recording a 10 per cent spike, while household consumption grew by 5.7 per cent, according to the statistics agency.

Net employment increased by 1.1 million to 110.8 million as of end-August.

The head of the national statistics bureau, Suryamin, told a press briefing yesterday: "The increased job number indicates that the size of businesses has expanded. Industries certainly were not cutting activities as domestic demand has been high, although exports declined."

In addition, high investment growth means there will be further economic activity in the following quarters, he said, giving a rosy outlook for the economy.

The transport and telecommunications sector grew 10.5 per cent year-on-year, the fastest in the quarter ended September 30, mostly contributed by rising demand in the mobile-phone industry.

Construction came in second, and finance, real estate and corporate services third, with each of the two groups growing by more than 7 per cent.

Higher construction activities were attributed to the government's spending on the building of roads and bridges.

However, the moratorium on the hiring of civil servants this year and the early disbursement of civil servants' annual bonuses made government expenditure look smaller in the third quarter, said the statistics bureau.

Government spending declined by 3.2 per cent year-on-year.

Civil servants' bonuses were disbursed in the third quarter last year, but in the second quarter this year.

Exports contracted by 2.8 per cent, largely due to declines in the commodity sector.

Indonesia has navigated the global slowdown with reasonably robust growth, and domestic demand "clearly held up well relative to the rest of the region", said Aninda Mitra, ANZ bank's Singapore-based head of economics for Southeast Asia.

Indonesia may record an overall economic growth of 6.2 per cent this year, thanks to its resilience to global shocks, Dian Ayu Yustina, an economist at Bank Danamon, told The Straits Times. The country's stable inflation rates will prompt the central bank to keep its benchmark interest rate at 5.75 per cent this year, providing industries with stable financing costs, she added.

Wahyudi Soeriaatmadja

The Straits Times

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