Tue, 09 Feb 2010


By Aloysius Unditu and Michael Munoz
Feb. 9 (Bloomberg) -- Indonesia’s economy probably expanded at the fastest pace in a year in the fourth quarter as lower interest rates and government stimulus spurred consumer spending.

Asian economies from China to Vietnam are picking up speed after policy makers boosted spending and cut borrowing costs to counter the global recession. Indonesia has fared better than its neighbors during the slump as it relies less on exports and consumer confidence has been buoyed by the most stable political climate since the ouster of former dictator Suharto in 1998.

“For Indonesia, the risks have nothing to do with politics,” Nikhil Srinivasan, who helps manage about $30 billion as Singapore-based chief investment officer for Asia and the Middle East at Allianz Investment Management, said in an interview in Jakarta. “The only worry is making sure they push infrastructure so that growth can be more than 5 percent.”

The Jakarta benchmark stock index increased 87 percent last year and the rupiah gained 16 percent, the best performance from an Asian currency outside Japan, as foreign funds sought to take advantage of Indonesia’s strengthening economy.

“Investors have confidence in Indonesia,” said Handy Yuinanto, a fixed-income analyst at PT Mandiri Sekuritas in Jakarta. “Indonesia has more positive stories.”

Consumer Confidence

Growth in Indonesia’s $514 billion economy has been supported by rising consumer confidence, which according to a central bank index rose in January to near the five-year high recorded in July 2009 when President Susilo Bambang Yudhoyono was elected to a second term.

Yudhoyono, 60, has pledged to double spending on roads, seaports and airports to $140 billion over the next five years, part of his push to deliver economic growth of at least 6.6 percent by the end of 2014.

Consumer spending is also benefitting from low inflation, said economists including Alexander Eric Sugandi from Standard Chartered Plc. in Jakarta. Inflation slowed to a decade low of 2.78 percent last year.

Indonesian car sales rose to 148,598 units in the fourth quarter from 140,585 a year earlier, according to data from Indonesia’s Car Association. Sales may increase to between 550,000 and 600,000 this year from 486,061 in 2009, according to Joko Trisanyoto, PT Toyota Astra Motor’s marketing director.

Rising Profits

PT Bank Rakyat Indonesia may report an increase of between 10 percent and 15 percent in net income for 2009, said Sudaryanto Sudargo, finance director of the bank, before a profit statement due to be released this quarter. The Jakarta- based bank had a profit of 5.9 trillion rupiah in 2008, according to Bloomberg data.

Indonesia’s central bank cut its benchmark interest rate by 3 percentage points between December 2008 and August last year to shield the nation from the global recession. The country has since maintained its policy rate at 6.5 percent.

The Philippine economy expanded 1.8 percent in the fourth quarter of 2009 from a year earlier and China’s gross domestic product increased 10.7 percent.

Indonesia’s “economic upswing remains on track, with domestic demand leading the way,” said Ashira Perera, an economist at Capital Economics Ltd. in London.