Consumers, govt spending push economy higher

Consumers, govt spending push economy higher

The Jakarta Post
Jakarta

The Indonesian economy grew faster at 3.93 percent in the third
quarter of this year compared to the same period last year,
driven mainly by consumer and government spending, the Central
Statistics Agency (BPS) reported on Monday.

The agency is optimistic that the government's full-year
growth target of 4 percent can be achieved.

"I think it (the growth target) can be achieved. Spending both
by the government and the private (sector) is usually higher in
the fourth quarter with the Idul Fitri and Christmas
celebrations .... There's even a possibility that growth can be
more than 4 percent," BPS deputy chairman La Ode Saifuddin told
reporters.

BPS said that compared to the second quarter of this year,
gross domestic product (GDP), or the value of all goods and
services produced in an economy, grew by 2.93 percent in the
third quarter if compared to the second quarter. GDP expanded by
1.66 percent in the second quarter from the first quarter.

The agency said that consumer spending continued to be a
significant contributor to the third quarter growth as it grew by
4.80 percent from the same quarter last year.

Analysts have said that aggressive moves by the country's
banking sector provide consumer loans have contributed to the
strong consumer spending. This has been made possible as the
central bank has aggressively cut down its benchmark interest
rate amid a benign inflation environment, thanks mainly to a
stronger exchange rate of the rupiah against the U.S. dollar.

Meanwhile, BPS said that government spending also contributed
significantly as it increased by 9.64 percent. The government
usually spends more on various projects and programs during the
second half of the year.

But investment and exports remained weak, BPS said.

Investment only grew by 0.03 percent as investors,
particularly foreign investors, have been reluctant to resume new
investments in the country due to a host of problems such as
legal uncertainty, terrorism threats, poor infrastructure,
massive corruption and lingering labor problems. Meanwhile,
domestic corporate sector could not make new investments as the
banking sector was still afraid to lend fresh money due to the
slow progress in the restructuring of the corporate sector's
debts.

Analysts have said the poor performance of the export and
investment sectors meant the country was unable to achieve its
potential economic growth of 6-7 percent, a level which analysts
said was necessary in order to be able to create enough jobs for
the millions of unemployed people and resolve the poverty
problem.

Elsewhere, BPS said that almost all sectors in the economy
were expanding during the third quarter.

The agriculture, plantation, fishery, and forestry sector grew
by 0.79 percent; mining (7.43 percent); manufacturing industry
(2.36 percent); electricity, gas and clean water (6.71 percent);
construction (6.17 percent); trade, hotel and restaurant (3.80
percent); transportation and communications (10.99 percent);
finance and leasing (4.89 percent) and services (2.50 percent).

BPS said the size of the country's GDP in the nine-month
period of this year totaled Rp 1,291.6 trillion.