Indonesia's Economy Improves Slightly as Exports Rise

Indonesia economy picks up on export rise.

Jakarta, MINA – Indonesia’s economy grew slightly better than expected last quarter, supported by a pick- up in exports, while consumer spending continued to disappoint. Stocks and the currency pared losses.

Stronger exports and a surge in investment helped boost growth to a four-year high, marking the best performance since President Joko Widodo took office in 2014. But consumer spending remains sluggish even after an aggressive run of monetary policy easing, and risks including higher rates in the US are looming that could worsen financial market volatility, according to Bangkok Post.

Gross domestic product (GDP) rose 5.2% in the fourth quarter from a year earlier, the statistics bureau said in Jakarta on Monday. The median estimate of 17 economists surveyed by Bloomberg was for growth of 5.1%.

GDP fell 1.7% from the previous quarter, matching the median estimate.

GDP rose 5.1% last year, also matching the median estimate. That was the fastest since 2013.

“It’s not enough for Indonesia,” said David Sumual, chief economist at PT Bank Central Asia in Jakarta. “We need more than 5.2%, about 5.5%, to create the jobs that are needed. The government has some homework to do to figure out what must be done to get people spending.”

Household spending grew 5% in the fourth quarter from a year earlier, while government expenditure rose 3.8%. Investment increased 7.3% while exports strengthened 8.5%.

Retail sales grew just 2.6% in December compared to a year earlier. Given that spending by businesses and consumers makes up about half of Indonesia’s GDP, it’s set to remain a problem for Widodo, who has targeted growth of 7%.

The Jakarta Composite Index pared losses to 0.5% after being down as much as 1.6% before the data was released. The rupiah was down 0.3% to 13,493 per dollar as of 1.30pm in Jakarta, after losing as much as 0.4% earlier.

Finance Minister Sri Mulyani Indrawati expects a pick-up in growth this year as global trade strengthens. The central bank is forecasting growth of 5.1% to 5.5% this year.

Josua Pardede, an economist at PT Bank Permata in Jakarta, said the ongoing recovery in the global economy, particularly in China, the US and Japan, had contributed to the pick up in exports.

“There are still concerns about private consumption, which is still below 5%, although this was offset by exports, investment and government spending,” he said.

Bank Indonesia has signalLed the end of policy easing after 200 basis points of interest rate relief over the past two years. Governor Agus Martowardojo said last month that the benchmark rate of 4.25% is in line with efforts to maintain economic stability and boost the economic recovery.

Pardede said the central bank would likely maintain its current policy rate amid signs that “growth momentum continues to improve”. (T/RS5/RS1)

Mi’raj Islamic News Agency (MINA)