Indonesia’s economy expanded at a slower pace in the third quarter than economists expected, a disappointing outcome for the government as it struggles to boost growth in Southeast Asia’s largest economy.
Indonesia’s economy has expanded at an average of about 5 percent over the past five years, with government officials, including Finance Minister Sri Mulyani Indrawati, striking a more upbeat tone on the growth outlook. Mirza Adityaswara, senior deputy governor at the central bank, last week projected stronger growth in the third quarter.
While a rebound in commodity prices has helped deliver double-digit growth in exports for most of the year and investment has gained, consumer spending and credit growth has remained muted, even after eight rate cuts since the beginning of last year. The disappointing growth data coupled with low inflation keeps the door open for Bank Indonesia to continue to ease monetary policy.
- “The third-quarter GDP outturn poses downside risks to our forecast of growth accelerating to 5.5 percent in the second half from 5 percent in the first half (and hence our full-year 2017 GDP growth of 5.3 percent), said Euben Paracuelles and Brian Tan, economists at Nomura Holdings Inc. in Singapore. “We continue to expect an improvement in the fourth quarter due to more public sector capital expenditure disbursements and a continuation of higher private sector investment spending.”
- Weak private consumption, even though offset by stronger investment and exports, raises the prospect that the central bank could cut its benchmark rate again, said Aldian Taloputra, an economist at Standard Chartered Plc in Jakarta. “The risk of further easing in the first quarter remains on the table, should inflation continue to be benign and if the rupiah remains stable,” he said.
- Total exports rose 17 percent in the third quarter from a year earlier, with shipments of merchandise goods climbing 24 percent
- Investment growth accelerated to 7.1 percent from 5.4 percent in the second quarter
- Household consumption grew 4.9 percent in the third quarter from a year earlier but was little changed from the previous quarter
- Unemployment rate fell to 5.5 percent in August from 5.61 percent in same period last year
- Jakarta Composite Index pared earlier gains and was up 0.2 percent as of 1:30 p.m. local time
— With assistance by Manish Modi, Rieka Rahadiana, and Harry Suhartono
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