GDP grows 4.14% in 3-Q on stronger exports: BI

GDP grows 4.14% in 3-Q on stronger exports: BI

The Jakarta Post, Jakarta

Bank Indonesia estimated on Wednesday that the economy grew on
the back of an improved export performance by 4.14 percent on the
year in the third quarter, higher than the 3.76 percent posted in
the second quarter.

The stronger growth bodes well for the fulfillment of the
central bank's initial full-year prediction for growth of between
3.5 percent and 4 percent this year, Bank Indonesia governor
Burhanuddin Abdullah said.

"The improved export performance made a significant
contribution to economic growth in the third quarter,"
Burhanuddin told a press conference.

Bank Indonesia's estimation comes ahead of the government's
official announcement on the country's gross domestic product
(GDP) recorded in the same quarter, expected to be released by
Oct. 15.

In a press statement, BI said that in the last three-month
period of the year, the demand for exports was expected to remain
strong on continued signs of global economic recovery, especially
in the U.S., one of the country's main export destinations.

At present, net exports actually contribute less than 10
percent to the country's GDP, while domestic consumption
contributes about 75 percent and investment 15 percent, according
to the Central Statistics Agency (BPS).

In its latest monthly report, the BPS said exports in August
were valued at US$4.97 billion, lower than the $5.25 billion
posted a month earlier, mostly because of a 12.6 percent decline
in non-oil and gas exports from $4.25 billion to $3.72 billion.

However, the BPS is of the opinion that despite the slowdown
in August, the overall export performance has been relatively
encouraging so far.

"Although on-month exports in August declined, there was still
a 0.86 percent rise year-on-year," BPS chairperson Sudarti
Soerbakti said at that time.

The figures are even more encouraging taken cumulatively.

Over the first eight months of the year, exports were valued
at $40.66 billion, or an 8.75 percent rise over the same period
last year, when exports stood at $37.39 billion.

That included a 5.7 percent increase in non-oil and gas
January-August exports from $29.77 billion last year to $31.47
billion so far this year.

Nevertheless, economic growth of around 4 percent is deemed by
many as insufficient to deal with the country's chronic
unemployment problem. With some 2.5 million new entrants to the
labor market annually, the economy will need to expand by at
least 6 percent to be able to absorb them, economists say.

Elsewhere, Burhanuddin also said the central bank still saw a
chance for further cuts in its one-month interest rate in the
months to come as inflation was expected to remain in check and
the rupiah stable.

"We still see room for the interest rate to decline further,
but at a slower pace," he said.

Currently, the rate stands at an all-time low of 8.59 percent.
This means that during the quarter, the rate has come down by 87
basis points.

The declining trend in Bank Indonesia's interest rate,
according to the statement, has been followed by a decline in the
deposit rates offered by banks, as well as rates for commercial
loans.

It said that bank one-month deposit rates had declined by 214
basis points, while the rates for working capital and investment
loans had also declined by 105 and 73 basis points respectively.