Indonesia economy picks up with 5.1% growth in 2017

05 Feb, 2018 3:47 pm

JAKARTA (AFP) – Indonesia’s economic growth picked up slightly last year as the central bank repeatedly slashed interest rates, official data showed Monday, but analysts warned that there was little hope of another bump this year.

Southeast Asia’s biggest economy expanded by 5.1 percent on-year in 2017, up from 5.0 percent growth in 2016, while fourth-quarter growth came in at 5.2 percent, beating market expectations of 5.1 percent, government figures showed.

“The breakdown of the Q4 figures showed a pick-up in private consumption, government spending and investment growth, which more than offset a pullback in net exports,” said Gareth Leather, senior Asia economist at research house Capital Economics.

But he cautioned that Indonesia’s economy was not in the clear, with prices for key commodities palm oil and coal expected to be under pressure.

“We doubt the recovery has further to run,” Leather said in a report after the data were released.

“Credit growth remains very weak. Meanwhile, fiscal policy is unlikely to provide much of a boost to growth…Despite the promising outlook for global demand, export revenues are likely to be held back by low commodity prices,” he added.

Indonesian President Joko Widodo came to power in 2014 on a pledge to boost annual growth to seven percent annually but his government has struggled to rev up the commodities-driven economy.

In a bid to accelerate growth the central bank repeatedly slashed rates — including an unexpected drop to 4.5 percent from 4.75 per cent in August — and Widodo announced a series of economic stimulus packages.

In December, Fitch ratings agency raised Indonesia’s sovereign rating to its second-lowest investment grade, saying economic reforms meant the country could better weather external shocks.


It came after Standard & Poor’s raised Indonesia’s credit rating from junk status to investment grade.

Leather said Indonesia’s economic growth was likely to remain stuck around 5.0 percent this year and in 2019.

The potential for domestic political turmoil also remains high as the country approaches elections, observers say.

In January, the inflation rate eased to 3.25 percent, but a spike in rice prices has raised concerns about the cost of a dietary staple for most of Indonesia’s 255 million people.

 

 




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