Indonesia's economy grows at slowest pace in two years in Q1

Business & Markets 2013
Written by Reuters
Monday, 06 May 2013 13:23
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JAKARTA (May 6): Indonesia's gross domestic product grew at its
slowest pace in two years in the first quarter, expanding 6.02 percent
from a year earlier, hurt by slowing private consumption and a
contraction in mining services.
The expansion in the January to March period was below market
expectations and slower than the 6.11 percent registered in the previous
quarter.
A Reuters poll of 11 analysts expected first-quarter growth of 6.18
percent, and a 1.50 percent rise on a quarterly and seasonallyunadjusted
basis.
The outcome is below Bank Indonesia's target of around 6.2 percent
growth in the first quarter. Acting finance minister Hatta Rajasa expected the economy to expand 6.5 percent this year.
Andry Asmoro, senior economist at Bank Mandiri, said slower private consumption and moderation in investment accounted
for the deceleration in growth.
"It is in line with our Mandiri leading indicators that GDP growth will drop in 1Q13 and rebound slightly in 2Q13 to around
6.1-6.3 percent," Asmoro said.
"However, the risk on the GDP will come from the uncertainty of policy regarding the subsidised fuel price. This will create
higher inflation expectations. We expect that full year 2013 GDP growth will stay at around 6.1-6.2 percent," he said.
Private consumption grew 5.17 percent on-year, down slightly from 5.38 percent in the fourth quarter of last year, the
statistics bureau said on Monday.
The mining sector contracted 0.43 percent on the year, after growing 1.49 percent in the December quarter.
"It's a somewhat disappointing growth number and confirmed our thoughts that the economy is under pressure from the weak
rupiah, which has been putting pressure on investment growth," OCBC economist Gundy Cahyadi said.
"We now see Indonesia growing 6.3 percent this year, down from our previous forecast of 6.5 percent."
There are worries over the government's repeated failure to tackle the huge cost of fuel price subsidies which are eating into
the budget and diverting resources from areas of the economy which desperately needs improving, such as infrastructure.
On Thursday, Southeast Asia's biggest economy suffered a setback when ratings agency Standard & Poor's downgraded its
outlook to stable from positive on concerns over stalling reform momentum.