indonesia - Indonesia's Q3 GDP Growth Decelerates As Export And Consumption Fade

Indonesia’s economy experienced a slowed growth in the third quarter, losing momentum from the bounce in the previous quarter. The Southeast Asian country is now faced up with harder economic conditions as it is struggling with capital outflows and weakened exports.

The nation’s gross domestic product (GDP) grew 5.17 percent year-on-year in the July-September period, Statistics Indonesia (BPS) announced on Monday, lower than the second quarter’s 5.27 percent, the fastest pace in the last four years.

The slowdown was in line with the economic deceleration in Singapore and China, two of Indonesia’s major economic partners, BPS head Suhariyanto said.

Local economists attributed the economic slide largely to declining household consumption and a negative contribution from export, warning growth may weaken further.

“We think growth will tend to be slower in the coming future due to the impact of weakening rupiah,” Fakhrul Fulvian, chief economist of Jakarta-based Trimegah Securities said, giving a forecast GDP growth of 5.13 percent this year and 5 percent in next.

Though a weaker rupiah has not exacerbated inflation, Indonesia’s central bank has raised interest rates five times since mid-May to curb outflows from financial market, though in a measure that analysts believed could discourage domestic consumption demand.

In addition to rate hikes, the government has also put off infrastructure projects and imposed higher tariffs on a large variety of consumer goods, which could further retard growth.

Emerging Asia Analyst Alex Holmes at Capital Economics predicted economic growth at around 5 percent over the next couple of years, citing the export sector as a potential key drag on the economy due to weaker global growth and subdued commodity prices.

See Also: Indonesian Coal Exports Stumbled For Miners Facing Constraints

Declining coal and palm oil prices have had a negative impact on Indonesia’s exports, with the depreciation of the local currency unable to offset the hit to export revenues.

The export sector’s contribution to GDP in the third quarter was wiped by imports, according to data released by the statistics bureau.

Stronger investment and government spending also didn’t work well in stimulating growth in Indonesia’s household consumption, which accounts for over half of the nation’s GDP.

While the ongoing trade war between the United States and China is expected to hurt economic growth in the region, most analysts say Indonesia, which is less integrated into global production supply chains than its regional peers, will not be among the worst hit.

While the government set the official growth target at 5.4 percent for 2018 and 5.3 percent for next year, Finance Minister Sri Mulyani Indrawati last month told parliament 2018 growth was more likely to be 5.14 percent.

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