Growth slows in second quarter: BPS

Growth slows in second quarter: BPS

Zakki P. Hakim, The Jakarta Post/Jakarta

The country's economy grew at a slower rate in the second
quarter, compared to the first quarter of the year as consumer
spending weakened due to rising inflation.

The Central Statistics Agency (BPS) said that the economic
growth in the April-June period of this year was 4.32 percent
compared to the same period last year. The agency said that
year-on-year growth in the first quarter was 5 percent. (The
agency on Monday revised the first quarter growth from the
earlier reported 4.66 percent.)

Economists have previously predicted that the economy would
grow at around 4.7 percent in the second quarter.

The lower than expected growth rate means the government must
work harder to achieve its full-year economic growth target of
4.8 percent particularly amid the current trend of surging oil
prices, which economists said would eventually affect economic
growth both at home and abroad.

BPS did not provide an explanation on the slower growth rate,
but rising inflationary pressures during the past three months
due to weakening of the rupiah (the local unit has declined by
nearly 10 percent against the dollar) reduced consumer spending
as purchasing power weakened. Inflation hit a 15-month high of
7.2 percent in July, higher than the government's annual rate
target of 6.5 percent, due to soaring prices of food and other
basic commodities.

Domestic consumption has been the main engine of economic
growth during the past few years, accounting more than 68 percent
of gross domestic product (GDP).

Growth in household spending slowed to 5.26 percent in the
second quarter from 5.71 percent in the first quarter. Government
spending in infrastructure, meanwhile, expanded by 6.08 percent,
but less than half the 12.75 percent gain was in the previous
quarter.

Indonesia, the largest economy in Southeast Asia, has been
lagging behind its neighbors in terms of the pace of economic
recovery, mainly due to weak investment, a key factor for the
country to accelerate growth to more than 6 percent and help
resolve its chronic unemployment problem.

BPS said that GDP grew by 0.86 percent in the second quarter
from the first quarter, while it expanded by 4.66 percent in the
first half of the year compared to the same period of last year.