Indonesia's economic growth slows to 5% in Q3, matching forecasts

People walking past a shop in Jakarta. Indoensia's GDP rose 3.2 per cent in the third quarter from the previous three months. PHOTO: AFP

JAKARTA (BLOOMBERG) - Indonesia's economy grew in line with economists' forecasts in the third quarter as President Joko Widodo seeks to spur the nation onto a higher growth path.

Gross domestic product increased 5.02 per cent last quarter from a year earlier, compared with a revised 5.19 per cent in the second quarter, the statistics bureau said in Jakarta on Monday (Nov 7).

The median estimate of 22 economists surveyed by Bloomberg was for growth of 5.08 per cent.

GDP rose 3.2 per cent in the third quarter from the previous three months, compared with a median estimate of 3.25 per cent in a Bloomberg survey.

Southeast Asia's biggest economy has been undershooting the 7 per cent growth target set by Widodo when he took office two years ago, mainly due to low commodity prices and weaker global demand.

Jokowi, as the president is known, is seeking billions of dollars to help fund an ambitious infrastructure agenda that includes building roads, railways and seaports. He said last week the government has now set its sights on growth of more than 6 per cent in 2018 and a 10 per cent boost in investment.

Also helping to support the growth outlook are six interest rate cuts by Bank Indonesia this year to spur spending as inflation remains inside the 3 per cent to 5 per cent target band.

Oliver Jones, an economist at Capital Economics in London, said growth is likely to remain "stuck around the 5 per cent mark for the next few years".

"While we don't expect growth to weaken any further, with fiscal and monetary policy unlikely to provide much more support, a significant revival also looks unlikely," he said in an e-mail.

Given its aversion to market volatility, Bank Indonesia is unlikely to ease policy the rest of the year as the November and December meetings take place before the Federal Reserve meeting, said Weiwen Ng, an economist at Australia & New Zealand Banking Group in Singapore. A potential bright spot in the economy is the recent rise in commodity prices, he said.

Government spending declined 3 per cent in the third quarter from a year ago, while household consumption climbed 5 per cent Investment rose 4.1 perc ent, exports contracted 6 per cent and imports dropped 3.9 per cent in the period.

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