Dip in con­sump­tion, com­mod­ity prices hit In­done­sia Q2 growth

Kuwait Times - - BUSINESS -

In­done­sia’s econ­omy grew a slower-than-ex­pected 5.01 per­cent in the sec­ond quar­ter as a dip in house­hold con­sump­tion and a slow­down in key com­mod­ity prices hit the re­source-rich coun­try, data re­leased yes­ter­day showed. The yearon-year ex­pan­sion was un­changed from the first quar­ter but be­low the gov­ern­ment tar­get of 5.2 per­cent growth for 2017.

“We have to ad­mit that the 5.01 per­cent growth is be­low our ex­pec­ta­tion, but I’d say it’s still quite good con­sid­er­ing the global eco­nomic con­di­tions and the de­creas­ing com­mod­ity prices,” Suhariyanto, the head of In­done­sia’s Cen­tral Sta­tis­tics Bureau, said. Pres­i­dent Joko Wi­dodo came to power in 2014 on a pledge to boost eco­nomic ex­pan­sion to seven per­cent but his gov­ern­ment has strug­gled to lift growth rates in South­east Asia’s largest econ­omy, which is rich in re­sources but has suf­fered from a slump in com­mod­ity prices.

House­hold con­sump­tion, which ac­counts for more than half of In­done­sian GDP, was the main driver of growth, ex­pand­ing 4.95 per­cent year-on-year but down from the 5.07 per­cent growth seen in the sec­ond quar­ter last year. Growth in trade dipped, due to a slow­down in do­mes­tic goods pro­duc­tion and the sup­ply of im­ported goods, Suhariyanto said.

Cap­i­tal Eco­nom­ics de­scribed the re­sult as an­other dis­ap­point­ing quar­ter for In­done­sia. “Look­ing ahead, we see lit­tle prospects of a sus­tained re­cov­ery,” Gareth Leather, se­nior Asia economist at the con­sul­tancy, said. Au­thor­i­ties have been scram­bling to boost growth, with the cen­tral bank slash­ing in­ter­est rates six times last year and Wi­dodo an­nounc­ing a se­ries of eco­nomic stim­u­lus pack­ages. Although Wi­dodo’s pledge of rais­ing growth rates to seven per­cent a year looks un­likely, In­done­sia’s eco­nomic fun­da­men­tals have im­proved in re­cent years.

Stan­dard and Poor’s (S&P) up­graded In­done­sia’s sov­er­eign bond rat­ing to in­vest­ment grade in May, bring­ing it in line with the two other ma­jor agen­cies, Moody’s In­vestors Ser­vice and Fitch Rat­ings. The World Bank said in June In­done­sia needed to press ahead with struc­tural re­forms to lessen its com­mod­ity de­pen­dence. Im­prov­ing the tax-GDP ra­tio and re­form­ing sec­tors pro­tected from for­eign in­vest­ment should be pri­or­i­ties, the global lender said. — AFP

MANILA: A gen­eral view shows the slum area (fore­ground) and Makati city (back­ground) in Manila yes­ter­day. —AFP

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