Indon Q2 economy grows 5.18%


JAKARTA: Indonesia’s economy grew more than expected in April-June, official data showed on Friday, thanks to a boost in consumer spending during Ramadan and surging state spending.

While the result is below the government annual target, analysts said it could indicate that Southeast Asia’s biggest economy may finally be pulling out of a long slowdown.

The 5.18 percent on-year expansion beat forecasts of about 5 percent and was also up on the previous quarter’s 4.92 percent.

Fuelling the jump was a pick-up in manufacturing activity and a surge in consumer demand during the Islamic holy month, which fell mostly in June, the National Statistics Agency said.

Consumers in the world’s most populous Muslim-majority country typically splash out on expensive foods and clothes during the Ramadan festival.

President Joko Widodo, known as Jokowi, was elected two years ago on a pledge to boost the economy and has taken a series of steps to help the ailing G20 nation.

April-June saw a 36 percent jump in government spending from the previous quarter, while he has also pushed a major infrastructure program and launched a tax amnesty aimed at luring back to the country billions of dollars of undeclared income.

The central bank in June cut interest rates for a fourth time this year in a bid to stimulate growth.

“The outlook for Indonesia’s economy has improved in recent months, raising hopes that the economy could be on the cusp of a sustained recovery,” said Gareth Leather of Capital Economics.

Growth in the resource-rich nation has been slipping in recent years due mainly to a slowdown in demand for its key commodity exports — such as coal and precious metals — particularly from Asian powerhouse China.

Last week Jokowi appointed leading reformist Sri Mulyani Indrawati, who had until recently been a World Bank managing director, as finance minister in a cabinet reshuffle.

However growth is still well below Jokowi’s annual target of seven percent and Leather urged more action to build on recent measures aimed at attracting more overseas investment.

“Although recent steps to open up the economy to foreign competition are welcome, Indonesia still has a long way to go if it is to turn around one of the most protectionist business environments in the region,” he said.

Capital Economics forecast Indonesia’s economy would grow around five percent this year and next.



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