Indonesia’s Q4, 2016 GDP growth seen edging higher

• Feb 03, 2017

JAKARTA: Indonesia on Monday will report fourth-quarter data that’s expected to show annual economic growth moved back above 5% in 2016, but just barely.
In 2015, growth slumped for a fifth straight year, falling to 4.79%, the lowest since 2009.
For the last quarter of 2016, the median forecast of 18 analysts in a Reuters poll is for growth of 5.07% from a year earlier. In July-September, growth was 5.02%.
The poll’s median for all of 2016, from 17 analysts, is 5.03%. 

Indonesia’s government initially targeted 5.3% growth for 2016, but towards the end of the year, officials said conditions pointed to a more muted 5.0%.
The five years of declining annual growth rates were rooted in low global commodity prices, slower growth in Indonesia’s trading partners, tepid foreign investment and infrastructure bottlenecks.
Firmer prices of Indonesia’s main commodities in the last few months increased exports in the fourth quarter, said Juda Agung, a senior central bank official.
Household consumption probably continued to grow relatively strongly in October-December because it “got a windfall from rising commodity prices”, Agung said.
But government spending cuts, which hurt growth during July-September, continued to take a toll on GDP expansion in the subsequent quarter. In total, the government spent 223.4 trillion rupiah (US$16.72 billion) less than planned during 2016.
Foreign direct investment was also weak in the final three months of 2016, growing only by 2.1% from a year earlier in rupiah terms.
SOME OPTIMISM 
Analysts have also pointed to disappointing data on industrial production, credit growth, auto sales and retail sales towards the end of last year.
Bank Indonesia (BI) in 2016 cut its benchmark interest rate six times, by a total of 150 basis points. But banks, facing rising bad loans, had not been cutting lending rates and loan expansion slowed.
Analysts were more optimistic about 2017 despite global uncertainty surrounding US economic policy under President Donald Trump.
The Reuters poll’s median forecast for 2017 growth was 5.20%.
Gundy Cahyadi, an economist at DBS in Singapore, said: “Given that sentiment among businesses is on the rise, investment demand is set to improve this year, providing a boost to overall GDP growth.” 
The World Bank, forecasting 2017 growth of 5.3% for Indonesia, said the higher rate “will be supported by more robust private investment following monetary easing in 2016 and ongoing investment climate reforms.” – Reuters

Source: http://www.thestar.com.my/business/business-news/2017/02/03/indonesia-q4-gdp-growth-seen-edging-higher/#571qVKX5CQY7YrSb.99