Indonesia’s Economy Shows Resilience as GDP Beats Forecasts

(Bloomberg) -- Indonesia’s economy grew faster than economists expected last quarter, showing resilience in the face of a series of interest-rate hikes and weaker global demand.

Gross domestic product rose 5.18 percent in the fourth quarter from a year ago, compared with the 5.1 percent median estimate in a Bloomberg survey of economists. That took expansion for the whole year to 5.17 percent, the fastest pace since 2013, statistics office said on Wednesday.

Indonesia’s Economy Shows Resilience as GDP Beats Forecasts

Key Insights

  • Growth in Southeast Asia’s biggest economy has been hovering around 5 percent since 2016, with consumer spending struggling to pick up and investment remaining subdued
  • The government is projecting growth of 5.3 percent this year, while Bank Indonesia expects the economy to expand between 5 percent and 5.4 percent. That’s still well below the 7 percent target set by President Joko Widodo when he took office in 2014
  • Household consumption, which rose 5.08 percent in the fourth quarter from a year ago, got a boost from the government’s cap on energy prices and cash handouts, helping to offset the impact of six interest rate hikes since May
  • Last quarter’s GDP growth also got a boost from investment, up 6.01 percent from a year ago, and exports, which rose 4.33 percent

Market Reaction

  • Rupiah strengthened 0.4 percent to 13,898 against the dollar, the highest since June while the Jakarta Composite Index gained as much as 1 percent. The yield on 10-year sovereign bonds dropped 15 basis points to 7.71 percent, the lowest since August
  • Good fourth-quarter numbers signal that domestic demand is still good, Dian Ayu Yustina, an economist with PT Danamon Bank in Jakarta, said in a text message. “We expect the trend to continue this year, especially on private and government consumption. Better-than-expected growth could provide some relief for the central bank and put more focus on current-account deficit and rupiah.”
  • Bank Indonesia seen maintaining rates in February, but will retain its hawkish stance as “we are not out of the woods yet with an expected large current-account deficit in fourth quarter,” Yustina said.
  • The positive growth data should encourage foreign investors and support the nation’s stocks and currency, according to Myrdal Gunarto, an economist with Maybank Indonesia.

Get More

  • Compared with the previous quarter, GDP fell 1.69 percent, better than the median estimate for a 1.75 percent contraction as exports fell 2.2 percent and household spending was little changed though government spending surged almost 38 percent
  • Click here for a summary of fourth quarter GDP

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