In­done­sia’s Q3 GDP growth slows

> Ex­ports shrink fur­ther and govt spend­ing slumps

The Sun (Malaysia) - - SUNBIZ -

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.

Newspapers in English

Newspapers from Malaysia

© PressReader. All rights reserved.