Indonesia 2015 GDP weakest in 6 years despite acceleration in Q4

People walk near an entrance to Bank Indonesia's headquarters in Jakarta, Indonesia, on Jan 14, 2016.
People walk near an entrance to Bank Indonesia's headquarters in Jakarta, Indonesia, on Jan 14, 2016.PHOTO: REUTERS

JAKARTA (REUTERS) - Indonesia's economy picked up speed in the fourth quarter but full-year growth was still the slowest since the global financial crisis as weak consumption, investment and exports took a toll on output.

Southeast Asia's largest economy grew 4.79 per cent in 2015, underpinned by public spending, data from the statistics bureau showed on Friday (Feb 5). A collapse in prices for its main commodities and cooling growth in major trading partner China, however, weighed on overall growth.

Gross domestic product expanded 5.04 per cent in the October-December quarter from a year earlier, faster than the 4.80 per cent expected in a Reuters poll and 4.73 per cent in the third quarter, as investment growth accelerated thanks to rising public spending.

"The government appears to have found better footing by now and infrastructure projects would start to help momentum more forcefully," said Wellian Wiranto, an economist with OCBC in Singapore.

After disappointing investors with the slow pace of reforms, President Joko Widodo began rolling out a series of stimulus measures in September last year in an attempt to make investment, especially in manufacturing, the main driver of growth. He offered firms tax break of up to 20 years, among other incentives.

Private consumption, which makes up more than half of Indonesia's economy, was more or less stable in the fourth quarter, despite reports of factory closures and lay-offs.

Indonesia's stock market extended its gains after the data, while the rupiah was more or less steady.

To aid growth, Indonesia's central bank cut its benchmark interest rate for the first time in 11 months in January, by 25 basis points to 7.25 per cent.

Bank Indonesia, which next meets to decide policy on Feb 17-18, has said it will review the need for further easing.

Banking on better government spending and investment, many economists are expecting growth to improve steadily this year after a slowdown for five straight years.

The central bank said it sees 2016 growth at 5.2 per cent and 5.5 per cent in 2017 - the Reuters poll taken before the data had a median forecast of 5.1 per cent growth for this year.

Some analysts, however, are cautious about the outlook.

"At the margin, Indonesia has ended 2015 on a less-weaker footing than we previously thought," said Glenn Maguire, Chief Economist at ANZ Bank in Singapore. "We are yet to be convinced that the major expenditure categories we need to see bounce to pull the growth recovery onto a more stable trajectory are indeed sustainably recovering."