In­done­sia’s growth re­duces need for rate cut

The Pak Banker - - Front Page -


In­done­sia’s eco­nomic growth prob­a­bly held above 6 per­cent last quar­ter, as do­mes­tic spend­ing and ris­ing in­vest­ment coun­tered fall­ing ex­ports, giv­ing the cen­tral bank room to re­frain from cut­ting in­ter­est rates.

Gross do­mes­tic prod­uct prob­a­bly grew 6.2 per­cent in the three months through Septem­ber from a year ear­lier, ac­cord­ing to the me­dian es­ti­mate of 12 economists sur­veyed by Bloomberg News ahead of a gov­ern­ment re­port due Nov. 5. The econ­omy ex­panded 6.37 per­cent in the pre­vi­ous quar­ter. Bank In­done­sia will prob­a­bly keep its bench­mark rate at 5.75 per­cent on Nov. 8, ac­cord­ing to all 11 economists in a sep­a­rate sur­vey. In­done­sia’s ex­ports fell 9.4 per­cent in Septem­ber from a year ear­lier, a re­port showed yes­ter­day, a sixth straight month of de­clines.

Pol­icy mak­ers in South­east Asia’s big­gest econ­omy have avoided adding to a Fe­bru­ary rate cut even as neigh­bors from Thai­land to the Philippines ex­tended mone­tary eas­ing to counter fal­ter­ing global growth. The ru­piah is Asia’s worst-per­form­ing cur­rency this year, boost­ing im­port costs and push­ing in­fla­tion to a 13-month high in Oc­to­ber. “There’s less need to ease be­cause the do­mes­tic econ­omy is run­ning quite hot,” said Eu­gene Leow, a Sin­ga­pore­based econ­o­mist at DBS Group Hold­ings Ltd. “In­done­sia will be re­silient and all the in­di­ca­tors so far in terms of con­sump­tion have been sup­port­ive,” said Leow, who ex­pects a 75 ba­sis­point in­crease in in­ter­est rates by the end of 2013.

The ru­piah touched a three­year low yes­ter­day and rose 0.1 per­cent to 9,618 per dol­lar as of 10:17 a.m. in Jakarta. It has fallen about 6 per­cent this year, the big­gest de­cline among 11 most­traded Asian cur­ren­cies tracked by Bloomberg. The yield on the bench­mark 10-year bonds slid to an al­most eight-month low, while the Jakarta Composite in­dex was lit­tle changed. Pres­i­dent Susilo Bam­bang Yud­hoy­ono has pledged to build more high­ways, air­ports and ports to im­prove in­fra­struc­ture and meet a growth tar­get of an av­er­age 6.6 per­cent by the end of his sec­ond term in 2014. Do­mes­tic in­vest­ment in the third quar­ter climbed 33 per­cent and for­eign di­rect in­vest­ment ad­vanced 22 per­cent from a year ear­lier, gov­ern­ment data showed last month.

“Do­mes­tic de­mand re­mains strong,” said Eric Alexan­der Su­gandi, an econ­o­mist at Stan­dard Char­tered Bank Plc in Jakarta. “So the cen­tral bank will keep in­ter­est rates at the cur­rent level in Novem­ber to sup­port the econ­omy and the ru­piah.” Malaysia is also due to an­nounce its pol­icy de­ci­sion on Nov. 8. The Bank of Korea will hold its bench­mark rate at 2.75 per­cent on Nov. 9, ac­cord­ing to a sur­vey. In­done­sia’s ex­ports fell 9.4 per­cent in Septem­ber from a year ear­lier, a re­port showed yes­ter­day, a sixth straight month of de­clines. Con­sumer prices climbed 4.61 per­cent in Oc­to­ber from a year ear­lier. Still, the man­u­fac­tur­ing Pur­chas­ing Man­agers’ In­dex climbed to 51.9 from 50.5 in Septem­ber, HSBC Hold­ings Plc and Markit Eco­nom­ics said yes­ter­day, and strong lo­cal de­mand has boosted rev­enues of com­pa­nies.

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