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World Bank cuts Indonesia 2015 growth projection to 5.2 percent
December 8, 2014 / 6:03 AM / 3 years ago

World Bank cuts Indonesia 2015 growth projection to 5.2 percent

JAKARTA (Reuters) - The World Bank on Monday cut its projection for Indonesia’s economic growth in 2015 to 5.2 percent from 5.6 percent due to the weak outlook for fixed investment and trade as well as a slowing pace of loan expansion.

Workers toil at the construction site of a new pier at New Priok container terminal in north Jakarta, November 26, 2014. REUTERS/Beawiharta

The lender also revised its forecast for growth in gross domestic product (GDP) this year to 5.1 percent from the 5.2 percent projection it made in July.

Indonesia’s GDP expanded 5.01 percent in the third quarter on yearly basis, the slowest pace since 2009, as the pace of investment and net exports slowed.

“Any significant rebound of growth will require a strong rebound in investment and we’re not seeing an indication of that in Indonesia,” Ndiame Diop, the bank’s lead economist for Indonesia, told a conference in Jakarta on Monday.

Diop said weak imports of capital goods and slower loan growth indicated weak growth for 2015.

Imports of capital goods in January-October contracted more than 7 percent from a year earlier to $24.84 billion.

Indonesia’s central bank expects 2014 loan growth of 11-12 percent, which would be the slowest since 2010 and roughly half of last year’s pace of 21.4 percent.

President Joko Widodo’s decision to raise subsidized gasoline and diesel prices in mid-November is expected to have a limited short-term effect on GDP, but higher infrastructure and social spending from the budget savings might offset the impact on growth, Diop said.

The World Bank penciled in Indonesia’s GDP to grow 5.6 percent in 2016.

Widodo has pledged to accelerate growth in Southeast Asia’s largest economy to 7 percent on average during his five-year term.

Finance Minister Bambang Brodjonegoro has estimated economic growth next year at 5.8 percent.

Reporting by Gayatri Suroyo; Editing by Richard Borsuk

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