Indonesia’s Economy Shows Resilience as GDP Beats Forecasts
Indonesia’s Economic Growth Beats Forecasts to Reach 5.18%
(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.
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
--With assistance from Rieka Rahadiana.
To contact the reporters on this story: Tassia Sipahutar in Jakarta at ssipahutar@bloomberg.net;Viriya Singgih in Jakarta at vsinggih@bloomberg.net
To contact the editors responsible for this story: Nasreen Seria at nseria@bloomberg.net;Thomas Kutty Abraham at tabraham4@bloomberg.net
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