From: By Aloysius Unditu and Arijit Ghosh
Feb. 16 (Bloomberg) -- Indonesia’s economy expanded at the slowest pace in more than two years as the global recession crimped demand and reduced prices of the nation’s palm oil, rubber and electronics exports.
Southeast Asia’s biggest economy grew a less-than-estimated 5.2 percent in the fourth quarter from a year earlier after gaining a revised 6.4 percent in the previous three months, the statistics bureau said in Jakarta today. Economists surveyed by Bloomberg News had expected a 5.7 percent increase.
Japan’s economy, Indonesia’s biggest overseas market, last quarter shrank the most since the 1974 oil shock amid the world’s worst financial crisis since the Great Depression. Bank Indonesia may be under pressure to add to three interest-rate cuts in the past three months as the government estimates exports could rise in 2009 at the slowest pace in nine years.
“The situation is much worse than is being suggested by the numbers,” said Purbaya Yudhi Sadewa, chief economist at the Danareksa Research Institute in Jakarta. The central bank should lower its policy rate earlier in the year to spur the economy because “if the current trend continues, by the third quarter we will see negative growth,” he said.
Sadewa expects Bank Indonesia to reduce its key rate to 7.5 percent from 8.25 percent.
PT Excelcomindo Pratama, the nation’s third-largest mobile- phone company, said its revenue from the country’s palm-oil producing regions may decline by as much as 10 percent because of a fall in exports of the commodity. Indonesia is the world’s largest producer of the edible oil.
“Our revenue will be hit quite significantly in those areas,” Excelcomindo’s President Director Hasnul Suhaimi said in an interview last week. “We expect there will be an impact in textile- and shoe-producing areas as well.”
Indonesia’s new-car sales fell for the first time in almost two years in January as slowing economic growth and higher loan rates last year damped demand.
Exports grew 1.8 percent last quarter from a year earlier, according to today’s report, the slowest pace since the three months ended June 2004. Overseas sales plunged 20 percent in December, the biggest drop in more than seven years.
“East Asian economies can’t rely so much on exports because even if the U.S. economy recovers it can’t grow rapidly,” Asian Development Bank President Haruhiko Kuroda said in an interview in Jakarta today. The U.S. needs “more savings, which means the consumption to GDP ratio will be smaller.”
The rupiah has dropped more than 6 percent this year, making it the worst-performing currency after the South Korean won among Asia’s 10 most-traded currencies outside Japan.
The rupiah fell 1 percent to 11,888 against the dollar at 2:28 p.m. The benchmark stock index, which rose as much as 0.6 percent, was up 0.1 percent after the announcement.
Japan’s gross domestic product shrank at an annualized 12.7 percent pace in the three months to Dec. 31, contracting for the third straight quarter, the Cabinet Office said today in Tokyo.
The economy in Indonesia, Asia’s third-most populated nation, expanded 6.1 percent last year, slowing from 6.3 percent growth in 2007, according to today’s statement. The economy shrank 3.6 percent in the fourth quarter from the previous three months.
To boost employment and consumer demand, President Susilo Bambang Yudhoyono’s government plans a 71.3 trillion-rupiah ($6 billion) stimulus package. That includes a plan to give tax breaks that will save individuals and companies 43 trillion rupiah in payments this year.
The government said it will also spend 15 trillion rupiah on discounts for electricity tariffs and public works, adding to a previous plan to outlay 12.5 trillion rupiah on a stimulus package meant to subsidize taxes and duties.
“Fiscal stimulus and monetary easing will have a sizeable impact,” ADB’s Kuroda said.
To contact the reporters on this story: Aloysius Unditu in Jakarta at firstname.lastname@example.org; Arijit Ghosh in Jakarta at email@example.com