Lima, Peru. Indonesia may revise its economic growth forecasts, as declining foreign investment and weakening demand for exports slows the country’s expansion, President Susilo Bambang Yudhoyono said over the weekend.
Southeast Asia’s largest economy may grow 6 percent this year amid the worsening global financial crisis, Yudhoyono told business leaders in Lima, where he is attending the annual meeting of the Asia-Pacific Economic Cooperation forum. The official 2008 GDP forecast was 6.2 percent.
“We expect export growth to slow down with falling commodity prices and a global recession,” Yudhoyono said. “Our economic growth is dependent on developed and developing nations. The sources of growth will come more from our large domestic market.”
Exporters in Indonesia, the world’s biggest producer of palm oil and the second-largest maker of rubber, are reeling from a slump in commodity prices amid recessions in the US, Europe and Japan.
Indonesia’s economy grew at the slowest pace in six quarters in the three months ended September.
Growth may be as little as 5 percent in 2009, down from a previous estimate of between 5.5 percent and 6.5 percent, Finance Minister Sri Indrawati Mulyani said this month. Still, Indonesia is more resilient now than it was a decade ago during the Asian financial crisis, Yudhoyono said over the weekend.
Last week, the Central Statistics Agency said that Indonesia’s gross domestic product in the third quarter fell to its lowest growth rate in 18 months, triggered by slowdown of export growth on the back of global economic slowdown.
Still, year-on-year GDP growth of 6.11 percent in the third quarter compared to 6.44 percent in the second quarter was higher than many analysts expected, as a strong rise in government expenditures and only a modest weakening in consumer spending helped buoy the economy.
PT Bank Danamon Tbk economist Anton Gunawan said that the slowdown was partly driven by growth of food crop production, including rice and corn.
Unfortunately, some sectors outside of agriculture also showed some deterioration.
The usually strong growth in vehicle and machinery production eased on a year-on-year basis and managed to pull down economic growth.
Anton said that going forward, the economy is still poised to slow in the fourth quarter and the whole of 2009.
Up until October, consumer confidence has not declined, but car and motorcycle sales have shown signs of easing. So too have domestic cement sales. Meanwhile, export growth may continue to deteriorate as external demand falls further.
“But an important point to note is that import growth could also slow significantly in response,” Anton said.
“So we must stress that the forthcoming current account deterioration should not be exaggerated.”
He said that slowing imports could also provide a buffer during the downturn and may prevent the economy from contracting severely. In connection with this, he expects the country’s economy to grow by close to 6.2 percent and may drop further to around 5 percent in 2009.
Bloomberg & Jakarta Globe