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Slower growth in Q3, but no letdown for RI policymakers
Indonesia is predicted to see a slower gross domestic product (GDP) in the third quarter due to moderation in household consumption and investment
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ndonesia is predicted to see a slower gross domestic product (GDP) in the third quarter due to moderation in household consumption and investment.
But the slower growth might not lead to disappointment among policymakers who now opt for stability rather than robust economic expansion, analysts say.
The Central Statistics Agency (BPS) is scheduled to release the third quarter GDP growth figure on Wednesday, with economists forecasting it to be lower than the 5.81 percent recorded in the second quarter.
'The cause is likely domestic demand in both private consumption and investment as the impact of the subsidized fuel price hike intensified in the third quarter of 2013,' according to economists from state-run Mandiri Sekuritas, a unit of the country's largest lender, who predicted the growth to slow down to 5.67 percent.
In the second quarter, Indonesia's economic growth fell below 6 percent for the first time in more than two years, triggered by the slowdown of household consumption and investment, the country's two biggest growth drivers that respectively account for 55 percent and 33 percent of its GDP, according to BPS data.
Economists from Bank Tabungan Negara (BTN) and Bank Danamon predicted Indonesia's growth in the third quarter to fall to between 5.5-5.6 percent, while those from Credit Suisse and DBS Bank said the economy would expand by 5.7 percent.
An economist from Moody's Analytics, a research arm of rating agency Moody's Investors Service, shared a conservative view, forecasting the figure to fall at 5.1 percent, citing Bank Indonesia's (BI) monetary tightening policy as 'choking domestic demand'.
The National Development Planning Ministry said that every 1 percent of economic growth could create at least 220,000 additional jobs, while the Finance Ministry estimated that it could bring additional state revenues of at least Rp 10 trillion (US$880.67 million).
Finance Minister Chatib Basri offered an optimistic estimate of 5.8 percent in GDP growth in the third quarter, thanks to the likely rebound in exports in support of better-than-expected economic data in China, Indonesia's largest trading partner.
Nevertheless, Chatib stressed the need for Indonesia to pursue slower GDP growth for the sake of economic stability in the long-run. Amid the global economy's stalling recovery, a 5-plus percent growth could still be considered as an achievement as it would still make Indonesia the second-fastest economy after China in the G20, the minister argued.
BI Governor Agus Martowardojo warned that Indonesia's robust 6-plus percent economic expansion might not be sustainable in the long-run as it came at the expense of a widening current account deficit and intensifying pressure on the currency.
'... [government] officials would be more tolerant of a slower growth rate going into 2014,' said Gundy Cahyadi, an economist with Singapore-based DBS Bank.
'Not that this is a bad thing in any case, especially if we remember that even 5.5-6.0 percent growth in the economy still means a huge increase in terms of nominal size, given that Indonesia is nearly a $900 billion-sized economy,' he wrote in an email.
