Indonesia’s Q3 GDP growth slows
> Exports shrink further and govt spending slumps
JAKARTA: Indonesia’s economic growth weakened in the third quarter, hurt by a slowdown in major trading partners and a slump in government spending, suggesting the economy could struggle to mount a solid rebound over the next year.
Southeast Asia’s largest economy grew 5.02% on an annual basis in JulySeptember, the statistics bureau said yesterday, broadly in line with expectations in a Reuters poll, but slower than the 5.19% in the second quarter.
The third quarter result puts Indonesia further away from President Joko Widodo’s ambitious 7% growth pledge, a goal he announced when campaigning for the presidency in 2014 only to see it pushed into the distance by slow reforms, red tape and weak global demand.
A contraction in exports deepened to 6% in the third quarter, from the 2.73% slump in the previous quarter, due to slowing growth in China, Singapore and South Korea, head of the bureau Suhariyanto said.
Government spending tumbled 45 trillion rupiah (RM14.4 billion) during JulySeptember from the same period last year, the data showed. Faced with a significant budget shortfall, Indonesia’s finance minister announced a US$10.2 billion (RM42.8 billion) budget cut for the whole of 2016 in August.
The resource-reliant economy has been hobbled in recent years by low global commodity prices, cooling growth in its trading partners, tepid foreign investment and infrastructure bottlenecks.
Last year’s growth of 4.8% was the weakest since 2009.
Capital Economics’ analyst Oliver Jones said the slowdown supported its view of Indonesia’s growth likely remaining stuck around 5% for the next five years.
“While we don’t expect growth to weaken any further, with fiscal and monetary policy unlikely to provide much more support, a significant revival also looks unlikely,” Jones said in a note.
Moreover, DBS economist Gundy Cahyadi said “the one worrying sign is that investment growth has actually eased to 4% from 5% previously”, which he linked to the moderation in government spending.
Still, it’s not all doom and gloom.
Many analysts argue additional revenue collection from the government’s flagship tax amnesty, which generated 98 trillion rupiah in state revenue, could help cushion the economy from aggressive state spending cuts.
Prices of palm oil and mining products like coal and nickel have risen in recent months. The benefits were seen in the mining sector returning to growth in the June-September period after shrinking for six consecutive quarters. – Reuters
Workers stand on steel bars at the construction site of a new apartment building in Jakarta, Indonesia, yesterday.