Mon, 16 Feb 2009
From:
By Arijit Ghosh and Michael Munoz
Feb. 16 (Bloomberg) -- Indonesia’s economy, Southeast Asia’s biggest, probably expanded at the slowest pace in more than two years in the fourth quarter as exports slumped.

Gross domestic product grew 5.7 percent in the three months ended Dec. 31 from a year earlier, after gaining 6.1 percent in the preceding quarter, according to the median forecast of 15 economists surveyed by Bloomberg News. The Central Statistics Bureau will release the data after 1:30 p.m. today.

The nation’s overseas sales plunged 20 percent in December as the deepening global recession cut demand for Indonesia’s rubber, electronics and oil. Slowing economic expansion adds pressure on the central bank to cut borrowing costs further to boost consumer spending as the government forecasts growth in exports will slow to a nine-year low of 1 percent in 2009.

“The actual magnitude of the slowdown may help decide how fast and how far further policy makers are prepared to cut,” said Helmi Arman, an economist with PT Bank Danamon Indonesia. “Investment growth is also likely to have slowed as the quarter saw cement-consumption growth easing, and commercial-vehicle sales dropping substantially.”

The rupiah has dropped more than 6 percent this year to 11,863 against the dollar, making it the worst-performing currency after the South Korean won among Asia’s 10 most-traded currencies outside Japan.

The central bank may cut its policy rate to 7.25 percent from 8.25 percent by year-end to help boost consumption, said Lim Su Sian, an economist with DBS Group Holdings Ltd. in Singapore.

Mobile Phones

“In this environment, you need to use whatever you have in your arsenal,” Lim said. “Still, there are concerns about employment outlook and income, things rate cuts can’t offset.”

PT Excelcomindo Pratama, Indonesia’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.

Local consumption, which accounts for about 70 percent of the economy, expanded 4.7 percent in the final quarter of 2008, according to the economists’ forecasts. That would be the slowest pace of growth since March 2007.

Exports Plunge

Exports grew 4 percent last quarter, according to the median forecast of seven economists, the slowest pace since the three months ended June 2004. Overseas sales posted the biggest drop in more than seven years in December.

“Headwinds are growing given the deteriorating growth outlook for Indonesia’s main trading partners,” said Prakriti Sofat, an economist at HSBC Holdings Plc in Singapore. Indonesia’s $433 billion economy may expand as little as 3.8 percent this year, she said.

Japan’s economy, Indonesia’s biggest export market, shrank at an annual 12.7 percent pace in the fourth quarter, the most since the 1974 oil crisis, the Cabinet Office said today.

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 the median forecast of 13 economists in the Bloomberg survey.

Government Stimulus

To boost employment and consumer demand, the 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.

The following is a table of economists’ forecasts.

======================================================
4Q 4Q
Firm QoQ YoY 2008 2009
======================================================
Median -2.53% 5.70% 6.10% 4.45%
Average -2.61% 5.60% 6.11% 4.55%
High -2.37% 6.00% 6.20% 5.96%
Low -3.20% 5.00% 5.99% 3.00%
Number of Estimates 9 15 13 12
======================================================
ANZ Banking Group -3.20% 5.00% 6.00% 4.50%
ATR-Kim Eng Capital -- 5.50% 6.10% 5.30%
BNI Securities -2.50% 5.70% 6.10% 4.30%
CIMB Niaga Bank -2.40% 5.75% 6.15% 4.40%
Danareksa Securities -2.37% 5.87% 6.18% 5.96%
DBS Group -2.70% 5.50% 6.00% 4.30%
HSBC -- 5.80% 6.20% 3.80%
Ideaglobal -- 5.70% 6.10% 5.50%
ING Groep NV -2.70% 5.50% -- --
Mandiri Securities -2.70% 5.51% 6.10% --
Moody’s Economy.com -- 5.07% 5.99% 3.86%
Morgan Stanley -- 5.50% -- --
OCBC Bank -- 6.00% 6.18% 4.80%
Reuters IFR -2.40% 5.80% 6.20% 3.00%
Samuel Sekuritas Indon -2.53% 5.82% 6.09% 4.87%
======================================================

==============================================
4Q 4Q
Private Govt 4Q
Firm Cons Cons Exports
==============================================
Median 4.70% 8.90% 4.00%
Average 4.93% 10.24% 2.31%
High 6.80% 21.40% 10.00%
Low 4.09% 1.90% -9.40%
Number of Estimates 9 9 7
==============================================
ANZ Banking Group 4.80% 21.40% -7.70%
BNI Securities 6.80% 8.10% 2.80%
CIMB Niaga Bank 5.65% 7.59% 7.60%
Danareksa Securities 4.09% 9.34% 8.89%
DBS Group 4.70% 11.40% 10.00%
Ideaglobal 4.50% 7.00% --
Mandiri Securities 4.70% 8.90% 4.00%
Moody’s Economy.com 4.50% 16.50% --
Samuel Sekuritas Indon 4.65% 1.90% -9.40%
==============================================


To contact the reporters on this story: Arijit Ghosh in Jakarta at aghosh@bloomberg.net



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