INTERNATIONAL BUSINESS

Indonesia’s Economy Slumps to Its Weakest Pace Since 2009

By REUTERS
JAKARTA, Indonesia — Indonesia’s economic growth in the first quarter slumped to its weakest annual pace since 2009, hit by soft global demand and a collapse in commodities, underscoring the challenge facing President Joko Widodo as he strives to revive Southeast Asia’s biggest economy.
Gross domestic product (GDP) rose 4.71 percent in January-March from a year ago, below the market’s median forecast of 4.95 percent, and down from growth of 5.01 percent in the final quarter of last year.
The data adds “to the case for further rate cuts,” said Daniel Martin, senior economist at Capital Economics.
”Although we doubt growth will slow much further in the coming quarters, we are not likely to see a strong rebound either.”
All sectors took a hit, the statistics bureau chief Suryamin told a press conference, with the manufacturing sector slowing and mining contracting 2.32 percent.
Investors, staring at what many analysts say is likely to be sub-par growth through the rest of this year, sold the Indonesian rupiah. The currency, the worst performer among emerging Asian peers this year, fell to 13,030 per dollar, its lowest since April 1.
The collapse of commodity prices has seen exports from Indonesia slumping 11.67 percent in the first quarter year-on-year, while imports also fell 15.10 percent.
On quarterly basis, GDP contracted 0.18 percent from the previous quarter.
The extent of any rebound in growth will largely depend on infrastructure projects being implemented, analysts said.
”Across expenditure categories, government investment emerged as the clear culprit behind the surprisingly weak GDP number,” economists at ANZ said, adding that a pick up in inflation will hamstring the central bank’s ability to add to its February cut in interest rates.
President Widodo who came to power six months ago with strong business-friendly credentials and a promise to beef up the country’s creaking infrastructure, has been hamstrung by rifts inside his own political party and squabbles between government agencies.
While Widodo has slashed fuel subsidies and freed up billions of dollars for long-neglected capital spending, many infrastructure projects are tied up in red tape.