Indonesia’s economy grew slightly better than expected last quarter, supported by a pick-up in exports while consumer spending continued to disappoint. Stocks and the currency pared losses.
Gross domestic product rose 5.2 percent in the fourth quarter from a year earlier. The median estimate of 17 economists surveyed by Bloomberg was 5.1 percent GDP fell 1.7 percent from the previous quarter, matching the median estimate.
Despite an aggressive run of monetary policy easing, consumer spending growth was little changed at about 5 percent last quarter.
And while the economy’s expansion was the fastest since 2016, risks are rising, including higher interest rates in the US, which could worsen financial market volatility.
“It’s not enough for Indonesia,” said David Sumual, chief economist at PT Bank Central Asia in Jakarta. “We need more than 5.2 percent, about 5.5 percent, to create the jobs that are needed. The government has some homework to do to figure out what must be done to get people spending.”
Government spending rose 3.8 percent in the fourth quarter from a year earlier, investment increased 7.3 percent while exports strengthened 8.5 percent. Retail sales grew just 2.6 percent in December compared to a year earlier. With spending by businesses and consumers making up about half of Indonesia’s GDP, sluggish demand is set to remain a problem for President Joko Widodo, who has targeted growth of 7 percent.
Finance Minister Sri Mulyani Indrawati expects a pick-up in growth this year as global trade strengthens. The central bank reiterated its growth forecast of 5.1 percent to 5.5 percent for this year. “The lack of confidence, among mid- to high-income people who put a brake on their spending, is expected to improve as economic activities recover this year,” Assistant Governor Dody Budi Waluyo said. Higher spending on capital investment and social assistance this year will help boost incomes, he said.