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Indonesia's first-quarter GDP growth edges up on higher exports
May 5, 2017 / 2:46 AM / 7 months ago

Indonesia's first-quarter GDP growth edges up on higher exports

JAKARTA (Reuters) - Indonesia’s economic growth picked up a touch in the first quarter on firmer export prices of some commodities and stronger demand in major trading partners, though analysts were split on how far this momentum will carry through to the rest of the year.

Aerial view of Sudirman business district during sunset in Jakarta, Indonesia May 5, 2017. REUTERS/Beawiharta

Southeast Asia’s largest economy grew 5.01 percent in the January-March period on an annual basis, the statistics bureau said on Friday, matching a Reuters poll and up slightly from 4.94 percent in the preceding quarter.

The resource-rich country has struggled through years of slowing growth as a plunge in commodity prices hurt everything from exports to investment and people’s purchasing power.

The recovery in prices of some of Indonesia’s main commodities, such as palm oil and coal, helped economic growth pick up to 5.02 percent last year, from 4.79 percent in 2015.

In the first quarter, exports of goods and services rose more than 8 percent. The head of the statistics bureau Suhariyanto attributed this to rising prices of commodities such as tea and shrimp. Demand was also supported by slightly better economic growth in China, the United States and Singapore - Indonesia’s major trading partners.

“This is promising and in line with growth in our export partners,” Suhariyanto told a briefing.

Consultancy Capital Economics described the first-quarter performance as disappointing and Natwest Markets said it was sub-potential.

But Standard Chartered and local brokerage Samuel Sekuritas were more upbeat and suggested it pointed to a better reading in coming quarters.

“It was an external driven recovery in line with our expectation. We see growth improving in the future as the government spends more,” said Standard Chartered economist Aldian Taloputra, who expects export gains to feed through to investment and consumption.

A man sits at a roof top restaurant during sunset in Jakarta, Indonesia, March 30, 2017. Picture taken March 30, 2017. REUTERS/Beawiharta

Standard Chartered expects the economy to grow 5.3 percent this year.

Capital Economics maintained its view that growth will likely remain stuck at around 5 percent over the next couple of years, with senior Asia economist Gareth Leather citing relatively depressed commodity prices and soft credit growth.

During the first three months, growth of private consumption, which accounts for more than half of Indonesia’s gross domestic product, slowed slightly, while investment remained sluggish.

A man sits at a roof top restaurant during sunset in Jakarta, Indonesia, March 30, 2017. Picture taken March 30, 2017. REUTERS/Beawiharta

But after lower state spending in the second half of 2016 had dragged on growth, the government increased spending in the first quarter.

Indonesia’s finance minister Sri Mulyani Indrawati told Reuters last month there would be no more spending cuts this year as revenue-collection was on track and 2017 GDP growth was likely to top the official target of 5.1 percent.

Meanwhile, the mining sector swung back to contraction after growing for a few quarters, due to a decline in production at big miners like PT Freeport Indonesia and Amman Mineral Nusa Tenggara, as well as lower oil and gas output.

Improving growth in other major sectors like agriculture and manufacturing helped compensate for the mining contraction.

Most economists in a Reuters poll on monetary policy believe the central bank is unlikely to support the economy with more rate cuts this year, having cut six times last year.

“The momentum to cut is constrained by rising inflation,” said Myrtal Gunarto, Maybank Indonesia’s economist. The central bank next meets for a policy review on May 17-18.

Additional reporting and writing by Gayatri Suroyo and Fransiska Nangoy; Editing by Shri Navaratnam

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