Economy slows down for 2nd consecutive quarter: BPS

Economy slows down for 2nd consecutive quarter: BPS

Urip Hudiono, The Jakarta Post, Jakarta

Indonesia's economy expanded at a slower rate during this year's
second quarter, as rising fuel prices triggered a domino effect
of higher inflation and key interest rates, all of which dampened
consumer spending, the Central Statistics Agency (BPS) asserted.

The BPS reported on Monday that the country's gross domestic
product (GDP) had grown by 5.54 percent from April to June, from
the same period last year.

Although the figure was still higher than last year's second
quarter growth of 4.38 percent, it marks a continued economic
deceleration for the second straight quarter, having grown by
6.19 percent in the year's first quarter and 6.67 percent in the
final quarter of last year, respectively.

The country's economic engine had also appeared to shift into
a lower gear during the second quarter, as the economy only
managed to expand by 1.01 percent from the first quarter. The
economy had accelerated by 2.68 percent in the first quarter,
from last year's final quarter.

BPS deputy chief for statistical analysis, Slamet Sutomo, said
the country's economic slowdown was primarily due to higher
inflation and interest rates eating away at consumption and
productivity.

Inflation in the country remained high at 7.84 percent as of
July after the government increased domestic fuel prices in
March.

"The global economy itself is slowing down from recently
soaring oil prices and rising interest rates," he said.

Explaining further the second quarter GDP growth by sector,
Slamet said all components in the country's economy experienced
growth, except for the mining and agricultural sectors, which had
respectively contracted by 2.87 and 0.96 percent.

Indonesia's transportation and communications sector recorded
the highest growth, at 13.91 percent compared to the same period
last year, or 3.67 percent compared to the first quarter.

"By quarter, an increased productivity in the mobile
telecommunications business had mostly contributed to the
sector's growth, while airlines and sea freight continued
supporting the sector on a yearly basis," Slamet said.

Following the transportation and communications sector in the
three top growing sectors, BPS reported that the services sector
had expanded by 9.97 percent, while trade and tourism grew 9.48
percent.

Slamet said the country's economy has also continued its
shifting from being driven mostly by consumption to more
sustainable investments.

The agency reported that investment, as measured by fixed
capital formation, increased by 13.21 percent, as compared to the
growth in household consumption of 3.46 percent.

Government consumption also slumped to a 5.61 percent
contraction.

Data from the Investment Coordinating Board (BKPM) shows that
foreign direct investment increased 70 percent to US$3.35 billion
in the first half of the year.

"With this trend, I'm sure this year's economic growth targets
can be achieved, particularly in government consumption," he
said, noting how the country's economy had already expanded by
5.86 percent during this year's first semester.

The government is expecting the economy to grow by a full-year
rate of 6 percent this year. The country's economy grew 5.13
percent in 2004 with a GDP of some Rp 2.3 quadrillion (some
US$242.4 billion).