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.