Muhamad Al Azhari

Uptick Expected in Indonesia's Third-Quarter GDP

Growth in the domestic economy likely accelerated slightly during the third quarter, as moderate inflation and a stronger rupiah boosted household consumption and exports continued to recover, economists and government officials said last week.

The Central Statistics Agency (BPS) is scheduled to release third-quarter GDP data on Tuesday.

Gundy Cahyadi, a Singapore-based economist with IDEAGlobal, predicted 4.3 percent annualized growth in the third quarter, up from 4 percent in the second.

“The growth trend is looking up, driven mainly by domestic demand, with private consumption likely to have spiked much higher in the third quarter compared to the second quarter,” Gundy said. He added that a stronger rupiah and contained inflation likely helped boost domestic expenditure by 5 percent in the quarter.

Inflation slowed again to 2.57 percent in October, after the prices of food and transportation rose during Ramadan and Idul Fitri in September.

The Finance Ministry and Bank Indonesia have predicted full-year inflation of below 4 percent, a level not expected to dampen household spending, which contributes 60 percent of GDP.

Finance Minister Sri Mulyani Indrawati said on Thursday that she expected third-quarter growth to have edged up to 4.1 percent to 4.3 percent, thanks to the global economic recovery.

PT Bank Danamon economist Helmi Arman said the economy likely grew by 4.05 percent year-on-year in the third quarter, as consumption, investment and export growth improved.

“Year-on-year growth in household spending may have also held up as retail sales growth climbed, although consumer confidence fell in August and September from its all-time high,” Helmi said.

He predicted year-on-year growth of household consumption at 5 percent in the third quarter. “During the quarter, the growth in the consumption of cement experienced a turnaround, and commercial vehicle sales growth also likely accelerated. The period also saw a substantial rise in the imports of capital goods, such as transportation-related equipment,” he said.

The economy grew at a slower pace in the second quarter because of declining exports and private consumption.

The BPS reported in early August that the economy grew by 4 percent in the second quarter from the same period a year ago, slower than the 4.4 percent expansion recorded in the first quarter of this year.

The agency reported that household consumption grew at a slower pace in the second quarter, rising at an annualized rate of 4.8 percent, compared with 6 percent in the first quarter.

Exports shrank by 15.7 percent in the second quarter from the same period a year ago.