Indonesia's GDP growth slows to 4.9% in Q4

Indonesia's gross domestic product expanded 5.02 per cent last year, up from a revised 4.88 per cent in 2015. Growth in the fourth quarter was helped by firmer commodity prices that increased exports, while government spending and investment contract
Indonesia's gross domestic product expanded 5.02 per cent last year, up from a revised 4.88 per cent in 2015. Growth in the fourth quarter was helped by firmer commodity prices that increased exports, while government spending and investment contracted.PHOTO: EUROPEAN PRESSPHOTO AGENCY

JAKARTA • Indonesia's gross domestic product grew 4.94 per cent in the fourth quarter to mark the slowest pace since the opening three months of last year, as household consumption cooled and government spending contracted, data showed yesterday.

South-east Asia's largest economy also faces uncertainty surrounding US policies under President Donald Trump and in one of its other main trading partners China, even as a spate of interest rate cuts last year should start to pay dividends by supporting investment.

Indonesia's economy grew 4.94 per cent on an annual basis in October to December, data from the statistics bureau showed, compared with 5.01 per cent in the preceding quarter.

The growth rate was below the median forecast of a Reuters poll of 5.07 per cent.

GDP expanded 5.02 per cent last year, up from a revised 4.88 per cent in 2015, the bureau also said. The poll had expected a full-year growth rate of 5.03 per cent.

The government originally set a 5.3 per cent growth target, but near the end of the year, officials said growth might only be 5 per cent.

Growth in the fourth quarter was helped by firmer commodity prices that increased exports, while government spending and investment contracted.

Meanwhile, the government spent 223.4 trillion rupiah less than planned last year, taking a toll on GDP expansion. "While we think the worst is now over, with commodity prices likely to remain depressed and policymakers running out of scope to stimulate the economy further, we expect growth to remain stuck at around 5 per cent over the next couple of years," Mr Gareth Leather, an economist at Capital Economics, said in a report.

The central bank, which has cut key interest rates six times last year to help growth, may have limited room to boost growth this year, as it expects inflationary pressure at home amid global uncertainties, mainly from the US.

Bank Indonesia (BI) is taking a "cautiously accommodative" monetary stance, from its previous bias toward easing, Governor Agus Martowardojo said last Friday.

BI cut its benchmark rate by a total of 150 basis points to 4.75 per cent.

The government set its economic growth target this year at 5.1 per cent, though it is describing this as conservative. Ten analysts in a Reuters poll last week gave a median forecast of 5.2 per cent for growth this year.

REUTERS

A version of this article appeared in the print edition of The Straits Times on February 07, 2017, with the headline 'Indonesia's GDP growth slows to 4.9% in Q4'. Print Edition | Subscribe