Indonesian Economy Probably Expanded at Fastest Pace Since 2008

May 7, 2010, 12:31 pm | Admin

From Bloomberg:

Indonesian Economy Probably Expanded at Fastest Pace Since 2008

2010-05-06 17:00:01.0 GMT

 

By Aloysius Unditu and Michael Munoz

May 7 (Bloomberg) — Indonesia’s economy probably expanded at the fastest pace in more than a year last quarter as record- low interest rates boosted consumer spending in Southeast Asia’s largest economy and exports and investment recovered.

Gross domestic product grew 5.79 percent in the three months to March 31 from a year earlier, compared with 5.4 percent in the previous quarter, according to the median forecast of 20 economists in a Bloomberg News survey. That would be the fastest pace since September 2008. Indonesia’s statistics bureau is due to release the data on May 10 in Jakarta.

Bank Indonesia has left its benchmark interest rate at 6.5 percent since August and urged lenders to expand credit as President Susilo Bambang Yudhoyono focuses on boosting growth after winning a second term last July. That’s lifted earnings at companies including PT Bank Rakyat Indonesia.

“Retail sales surged in the first quarter, supported by fiscal stimulus and high consumer confidence,” Nikhilesh Bhattacharyya, an economist at Moody’s Economy.com in Sydney, said in a note yesterday. “Business investment picked up, supported by easing credit standards, surging capital inflows and high capacity utilization. Exports grew rapidly on the back of strong demand from emerging markets.”

The Jakarta benchmark stock index has increased 11 percent this year and the rupiah gained 13 percent in the past 12 months to become the best performer in Asia, as foreign funds sought to take advantage of Indonesia’s strengthening economy and political stability.

Global Rebound

Growth in Asian economies from Malaysia to China is accelerating as the global recovery boosts demand for the region’s semiconductors, palm oil and televisions, after governments around the world boosted public spending and slashed interest rates to increase consumption.

Indonesia’s exports, which account for 29 percent of gross domestic product, surged 54 percent to $35.4 billion in the first quarter from $23.03 billion a year earlier, according to data from the statistics bureau.

“We have seen investment and exports start to pick up in the first quarter,” said Destry Damayanti, an economist at PT Mandiri Sekuritas, a unit of PT Bank Mandiri, in Jakarta. “More investment in big projects like in the airports and seaports should help boost the economy.”

Domestic and foreign investment totaled 42.1 trillion rupiah ($4.6 billion) in the first quarter, according to data from the Board of Capital Investment. Foreign direct investment accounted for 35.4 trillion rupiah.

Confidence Climbs

Economic growth has also been supported by rising confidence, buoyed by the most stable political climate since the ouster of the dictator, Suharto, in 1998. A central bank index measuring consumer sentiment rose to 107.4 in March from

98.6 a year earlier, bolstering demand for mobile phones and automobiles.

Car sales in Indonesia rose 74 percent to 174,042 units in the first three months of this year from a year earlier, according to the Association of Indonesian Automotive Industry.

Cement consumption rose to 10.3 million tons in the first quarter from 8.98 million tons a year earlier, data from an industry group shows.

“A more and more positive story is coming from Indonesia,” said Rudyanto Somawihardja, president director of PT Sinar Mitra Sepadan Finance, a financing company in Jakarta.

“Car sales are rising, cement sales are picking up, signaling an increase in purchasing power.”

Yudhoyono’s Plans

Sinar Mitra expects revenue to double to 3.7 trillion rupiah this year from 1.7 trillion rupiah in 2009, Somawihardja said this week.

Yudhoyono, 60, has pledged to double spending on roads, seaports and airports to $140 billion over the next five years to help deliver average growth of 6.6 percent over the remainder of his term ending in 2014.

“With ample liquidity now, banks are more than willing to finance infrastructure projects such seaports and toll roads,”

said David E. Sumual, an economist at PT Bank Central Asia in Jakarta.

Indonesia’s economy will probably grow 2.02 percent in the first quarter from the previous three months, after a contraction of 2.4 percent in the October-to-December period, according to the median forecast of 13 economists in a Bloomberg News survey.

 

–Editors: Stephanie Phang, Greg Ahlstrand

To contact the reporter on this story:

Aloysius Unditu in Jakarta at +62-21-2355-3028 or aunditu@bloomberg.net; Michael Munoz in Hong Kong at +852-2977-6112 or mjmunoz@bloomberg.net

 

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