Asian Economic News
Indonesian Economy Gains Momentum In Q3
11/10/2009 6:56 AM ET
(RTTNews) -
The Indonesian economy strengthened in the third quarter helped by higher investment and spending, official data showed Tuesday.
Southeast Asia's largest economy expanded at a pace of 4.2% annually in the third quarter compared to 4% growth in the second quarter, the Statistics Indonesia reported. The growth rate matched economists' expectations.
On the expenditure front, government spending climbed 10.2% from the previous year and household consumption rose around 4.7%. At the same time, gross fixed capital formation was up 4%. Meanwhile, exports slipped 8.2% and imports by 18.3%.
Quarter-on-quarter, gross domestic product increased 3.9% in the third quarter, with almost all economic sectors reporting increases. The GDP growth in the second quarter was around 2.3%. The agriculture sector reported the largest growth of 7.3%. Manufacturing industry showed 2.8% increase, while growth in construction was 5.5% in the third quarter.
The central bank expects the domestic economy to expand 4.3% this year and 5.5% next year. Annual GDP growth in the fourth quarter is expected to be better than the third quarter's performance.
In October, inflation unexpectedly slowed to a nine-year low of 2.57%. The central bank sees inflation continuing to decline in the medium term. According to Bank Indonesia, the inflation rate will remain between 3.5% and 5.5% in 2009 and it may accelerate to between 4% and 6% next year. The interest rate now stands at a record low of 6.5%.
Citing Indonesian economy's relatively strong resilience to the global recession and its healthy medium-term growth prospects, the Moody's Investors Service had upgraded Indonesia's foreign-and local-currency sovereign debt ratings to Ba2 from Ba3, on September 16. A pick-up in economic activity to its recent rate of 5.5% is expected in 2010, the rating agency said.
Ahead of the release of the data, economists at ING Bank said in a note that they expect reflationary policies to restore Indonesia's annual GDP growth to pre-Lehman 6% level in 2010. According to them, the bullish factors for the risky assets include strong growth outlook, healthy external payments and stable politics. ING economists view inflation as the only near-term risk for the economy.
Earlier this month, the World Bank raised its outlook on East Asian economies as timely fiscal and monetary policies as well as the robust performance of the Chinese economy stopped the decline in activity and set in motion the regional rebound. The Indonesian economy is now forecast to grow 5.4% in 2010 after an estimated 4.3% expansion this year.
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