Wed, 11 Nov 2009
From:
By FARIDA HUSNA and I MADE SENTANA
JAKARTA -- Indonesia's pace of growth accelerated in the third quarter, indicating a sustained recovery for Southeast Asia's largest economy due to a rebound in household spending, and investment by companies and industries.
[Indonesia GDP chart]

Indonesia's economy grew 3.9% quarter-to-quarter compared with 2.3% growth in the second quarter.

Also, gross domestic product expanded 4.2% from a year earlier during the July-September quarter, compared with 4% growth in the second quarter, the Central Statistics Agency said.

The better-than-expected number puts the government's target of 4.3% this year within reach, and will likely boost capital inflows, analysts said.

The median forecast of economists was for growth of 4.1% from a year earlier.

Benign inflation will enable the central bank to retain focus on growth and maintain its current monetary-policy stance, giving businesses and consumers the stability they need to ride out the financial crisis.

Government spending rose 10.2% from the same time last year as the government rolled out its fiscal stimulus, the agency said. Household consumption, which forms the backbone of the country's growth, increased 4.8% over the year, while investment spending gained 4%.

"The economic growth had seen a turnaround in the third quarter," said Slamet Sutomo, the agency's deputy chairman.

Darmin Nasution, Bank Indonesia's acting governor, said last week the central bank might maintain its benchmark overnight rate at 6.5% until the end of the year, as it predicts inflation will be below 4% this year. The bank last week decided to leave its key rate unchanged for the third time in a row.

The contraction in imports has slowed in recent months, suggesting that industries are bracing for a recovery and likely will benefit from the rupiah's appreciation as well as from lower interest rates.

Expecting the global economy to recover next year, the government has set a 5.5% growth target for next year, before expanding between 7% and 8% by 2014.



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