Spending Lets Indonesia Grow in Latest Quarter

JAKARTA — The global economic crisis took its toll on Indonesia in the third quarter as export growth eased, but the slowdown was offset by a boost due to festive spending.

While growth was relatively robust, coming as many major economies contract, economists said the domestic slowdown will likely continue as demand for Indonesian exports weaken.

In the July-September quarter, gross domestic product grew an unadjusted 3.54% from the previous quarter and 6.11% from last year, the Central Statistics Agency said Monday.

The third-quarter numbers compare with the previous quarter’s expansion of 2.44% from the prior three months and 6.39% year-to-year.

Agency chairman Rusman Heriawan said export growth was tempered by sliding commodity prices globally and weakening demand for Indonesian products from large markets such as Japan, the U.S. and Europe.

Indonesia’s exports grew 14.3% from last year, decelerating from the second quarter’s 16.1% growth.

But domestic consumption held up, growing 5.3% from a year earlier on holiday bonuses given by employers during the Muslim holiday period in September as well as the government’s cash handouts to poor households to help them cope with higher fuel prices.

Fiscal spending surge gave another kick, surging 16.9% over the year from the second quarter’s 2.2% growth, though private investment decelerated slightly to 12% from 12.8% in the previous quarter.

“The outlook going forward looks decent enough,” said Gundy Cahyadi, an economist with IdeaGlobal.

Mr. Cahyadi expects Southeast Asia’s biggest economy to grow at least 6% for the full year, a slowdown from the expansion of 6.32% in 2007.

He cautioned that while domestic demand has held up pretty well, exports are a cause for concern, especially if commodity exports slow amid easing prices.

With most of Indonesian’s major export markets slipping into recession, demand for its exports will likely continue to fall, dragging down Indonesian economic growth into next year.

“If Indonesia is able to rely consistently on private consumption growth, it could stay away from recession next year,” said OCBC economist Enrico Tanuwidjaja.

Dari WSJ

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