Mon, 09 Aug 2010

From: The Jakarta Globe

By Dion Bisara
Singapore. Indonesia’s economy grew at a better-than-expected 6.2 percent in the second quarter of 2010 from the same period a year ago, thanks to strong investment, exports and steady household spending, fueling predictions that more than 6 percent growth can be achieved for the year.

Cumulatively, the country’s economy grew 5.9 percent in the first half from the same period last year, accelerating from a 4.2 percent pace in 2009.

The latest growth figure exceeded analysts’ forecasts of 6 percent, and was the highest figure since the 6.25 percent posted in the third quarter of 2008, thanks mainly to strong domestic consumption and exports.

The government had estimated 5.8 percent growth in the second quarter, a more conservative figure than the central bank’s estimate of 6 percent.

“We expect growth momentum to remain strong in the second half of 2010, given the momentum in high-frequency indicators such as consumer confidence, cement and motor-vehicle sales,” said Prakriti Sofat, an economist at Barclays Capital in Singapore.

Slamet Sutomo, an official at the Central Statistics Agency (BPS), said, “Growth in the third quarter may peak and full-year growth may be above 6 percent.”

A breakdown of the data showed strong growth in investment and consumption.

Indonesia’s household spending remained strong, with car sales up 78 percent to a total of 196,132 units in the second quarter from a year ago.

That followed a 74 percent rise to 100,257 units in the first quarter from the same period last year, according to data from the Association of Indonesian Automotive Industries (Gaikindo).

On an annualized basis, household spending increased by 5 percent in the second quarter, up from 3.9 percent in the previous quarter. Consumption accounted for 56.7 percent of the country’s GDP.

Investment also showed strong growth, rising 8 percent in the second quarter, up from a 7.8 percent increase in the first quarter. Investment accounted for 31.6 percent of GDP growth.

Indonesia has started to attract more interest from foreign investors this year, with a flurry of recent announcements suggesting the country may see far more commitments in the coming months.

Earlier this week, the state-enterprises minister said China Investment Corp. might invest up to $25 billion in Indonesia.

Exports expanded 14.6 percent in the second quarter, down from 20 percent in the first quarter. Exports accounted for 23.8 percent of GDP. Imports also dropped to 17.7 percent annually, compared to 22.6 percent in the first quarter.

“The strong rupiah in the past month may explain this drop,” Slamet said.

Enrico Tanuwidjaja, a regional economist at OSK-DMG Group in Singapore, said, “Our forecast for the second half of 2010 is for the Indonesian economy to grow faster at 6.1 percent on the back of sustained employment growth that will keep domestic consumption growing, as well as encouraging signs from the recent FDI flows into the country that will continue to support domestic investment expenditure.”

He added that his full-year growth estimate for Indonesia was 6 percent.