Growth in South-East Asia’s biggest economy has been hovering around 5% since 2016

by BLOOMBERG

JAKARTA • Indonesia’s economy grew faster than economists expected last quarter, showing resilience in the face of a series of interest-rate hikes and weaker global demand.

GDP rose 5.18% in the fourth quarter (4Q) from a year ago, compared to the 5.1% median estimate in a Bloom-berg survey of economists. That took expansion for the whole year to 5.17%, the fastest pace since 2013, statistics office said yesterday.

Growth in South-East Asia’s biggest economy has been hovering around 5% since 2016, with consumer spending struggling to pick up and investment remaining subdued.

The government is projecting growth of 5.3% this year, while Bank Indonesia (BI) expects the economy to expand between 5% and 5.4%.

That’s still well below the 7% target set by President Joko Widodo, also known as Jokowi, when he took office in 2014.

Household consumption, which rose 5.08% in 4Q from a year ago, got a boost from the government’s cap on energy prices and cash handouts, helping to offset the impact of six interest-rate hikes since May. Last quarter’s GDP growth also got a boost from investment, up 6.01% from a year ago, and exports, which rose 4.33%.

Rupiah strengthened 0.4% to 13,898 against the dollar, the highest since June, while the Jakarta Composite Index increased as much as 1% yesterday. The yield on 10-year sovereign bonds dropped 15 basis points to 7.71%, the lowest since August.

Good 4Q numbers signal that domestic demand is still good, Dian Ayu Yustina, an economist with PT Danamon Bank in Jakarta, said in a text message.

“We expect the trend to continue this year, especially on private and government consumption.

“Better than expected growth could provide some relief for the central bank and put more focus on current- account deficit and rupiah.”

BI is seen maintaining rates in February, but will retain its hawkish stance as “we are not out of the woods yet with an expected large current-account deficit in 4Q”, Yustina said.

The positive growth data should encourage foreign investors and support the nation’s stocks and currency, according to Myrdal Gunarto, an economist with Maybank Indonesia.

Compared to the previous quarter, GDP fell 1.69%, better than the median estimate for a 1.75% contraction as exports fell 2.2% and household spen-ding was little changed though government spending surged almost 38%. — Bloomberg