Arab Today, arab today growth eases in indonesia
Last Updated : GMT 08:52:09
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Growth eases in Indonesia

Arab Today, arab today

Arab Today, arab today Growth eases in Indonesia

Jakarta - Arabstoday

Indonesia's economic expansion slowed in the first quarter, but robust domestic demand continued to make it one of the fastest-growing markets in the world. The first-quarter gross domestic product of Southeast Asia's largest economy was up 6.3% from a year earlier, Indonesia's Central Statistics Agency said Monday. While slightly off from the previous quarter's 6.5% pace, it was still one of the highest growth rates in the world. Two other big Asian economies—India and China—also expanded more than 6% in the first quarter, economists said. That the slowdown was only marginal "underscores that Indonesia is one of the countries out there that is much less exposed to global economic headwinds," said Leif Eskesen, chief economist for India and Asean for HSBC Global Research, in Singapore. Indonesia's economy has grown at an annual rate exceeding 5% in seven of the past eight years, thanks largely to its increasingly affluent middle class. The sprawling archipelago's population of more than 240 million ranks fourth in the world, behind only China, India and the U.S. And a growing number of Indonesians are seeing their incomes rise to a level that allows them to spend more on everything from motorcycles to instant noodles. The country's ability to simultaneously keep growth alive and inflation in check will decide whether it becomes the next big Asian success story—or the next Vietnam, which saw its growth (and the interest of global investors) tumble as inflation shot up past 25% last year. Unlike many of its neighbors, Indonesia doesn't depend on exports to Europe and the U.S. for growth, so slowdowns in those countries have had only a limited impact on its expansion. The statistics agency said that exports, which account for around 26% of GDP, were up 7.8% from a year earlier in the first quarter, slightly off from the fourth quarter's 7.9% pace. Growth in total investment, which accounts for around 32% of GDP, was up 9.9% from a year earlier, compared with 11.5% in the fourth quarter. Private consumption, the backbone of the economy, remained resilient, up 4.9% from a year earlier, matching the October-December rate. Consumption is set to remain strong, with the statistics agency pointing to a drop in the unemployment rate; it was at 6.3% in February, down from 6.8% a year earlier. Inflation, however, is still a concern, economists said. The rate in April passed 4% for the first time in more than six months as economic growth continued to put pressure on prices and the country's overburdened infrastructure. It could climb to more than 7%, analysts say, if the government revives plans to increase the price of subsidized fuel. The central bank, Bank Indonesia, will continue to use "all tools" to keep inflation expectations under control despite uncertainty over the government's fuel-subsidy policy, said Bank Indonesia's deputy governor, Halim Alamsyah, on Monday. "Economic growth this year will depend on the government's fuel-price policy," he said. "If they decide to raise the fuel price, it will push inflation higher and lower purchasing power." Mr. Alamsyah said domestic demand remains robust, and he forecast GDP growth of 6.3% to 6.5% for the second quarter. The slight cooling in the first quarter should give the central bank confidence that it doesn't have to lift interest rates just yet, analysts said. The bank is expected to keep key rates unchanged at a policy meeting on Thursday. "The slowdown in GDP growth is likely to be viewed as healthy by [Bank Indonesia] and consistent with its overall assessment of the external environment," said Euben Paracuelles, economist at Nomura in Singapore.

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