Economy slows down in Q3, for third quarter in a row

Economy slows down in Q3, for third quarter in a row

Urip Hudiono, The Jakarta Post, Jakarta

Indonesia's economy has continued growing at a slower rate,
official figures from the Central Statistics Agency (BPS) show,
as high oil prices and rising interest rates dampened exports and
investments, while consumption also stalled under a rising
inflation.

In its latest report on the country's economy in the third
quarter, BPS said Indonesia's gross domestic product (GDP) from
July to September only grew by 5.34 percent, compared to the same
period last year.

The figure marks a continued economic deceleration for three
quarters in a row, after a revised 5.84 percent growth during
this year's second quarter against 6.19 percent in the first.
Indonesia's economy had managed to expand by 6.65 percent during
last year's final quarter, wrapping up the year at 5.13 percent.

BPS deputy chief for statistical analysis, Slamet Sutomo, said
on Monday that the economic slowdown in the third quarter was
primarily due to soaring global oil prices, which had touched
US$70 a barrel on Aug. 30. A hike in fuel prices for industries
in August, following a fuel price hike by an average of 29
percent in March, had also made it even tougher for the economy.

The central bank, meanwhile, was forced to raise its key
interest rates amid a global trend of rate hikes and to support
the rupiah, which had slumped below Rp 10,000 to the U.S. dollar
as oil prices continued to rise.

Bank Indonesia (BI) also increased its rates to contain
inflation, which has shot up to 8.81 percent after the March fuel
price hike, and only eased down in May before rising again to
9.06 percent for the month of September.

"The high oil prices and rising interest rates have
particularly made production costs of businesses in the country
surge, slowing down the economy," Slamet said. "Rising inflation
also ate away at consumption."

BI Governor Burhanuddin Abdullah said the central bank would
try to avoid a significant interest rate hike again in the future
to avoid hurting economic growth.

The conditions meant year-on-year growth of exports choked at
3.39 percent from 12.69 percent in the second quarter with
exports failing to gain on a weaker rupiah, while investment
growth also slowed to only 9.18 percent from 14.54 percent.

Indonesia's main economic engine of consumption grew by 4.43
percent -- slightly higher than 3.46 percent in the second
quarter -- amid a new academic year and preparations for Ramadhan
and Idul Fitri, although it slowed down in anticipation of Oct. 1
fuel price hike.

Growth during the third quarter was only rescued by government
spending, which grew by 16.15 percent on more realized projects
during the period, so that the country's economy still managed to
expand by 5.76 percent to Rp 2,012 trillion (US$201.2 billion)
for this year's first nine months.

By sector, BPS reported that many components of the economy
were also experienced slower growth, with mining contracting by
2.32 percent from the same period last year.

One of the few rays of lights was Indonesia's transportation
and communications sector, however, which managed to retain high
growth of 12.87 percent.