RI's first quarter GDP grows by 6.35% due to improving FDI

Urip Hudiono, The Jakarta Post, Jakarta

Indonesia's economy had a good start to the year, achieving higher first quarter growth than last year on improving foreign direct investment, the Central Statistics Agency (BPS) said.

The BPS reported on Monday that the country's economy -- as measured by gross domestic product (GDP) -- expanded by 6.35 percent in the first quarter, compared to 4.83 percent in the same period last year. Growth was slightly lower than the 6.65 percent year-on-year growth in last year's final quarter.

Indonesia's economic engine has continued to run at high gear, increasing its production by 2.84 percent from last year's final quarter.

BPS deputy chief for statistical analysis, Slamet Sutomo, said this year's first quarter growth was partly due to a recent production increase in the agricultural sector.

"We just experienced a good harvest, increasing our stock of rice and other products," he said.

Indonesia's agricultural production grew a whopping 17.83 percent during the first quarter as compared to last year's fourth quarter, or 0.43 percent compared to the same period last year.

The service sector saw on-quarter growth of 1.63 percent, while the country's finance sector saw a 1.06 percent increase.

Productivity in the construction and the electricity, gas and water sectors also slowed from last year's fourth quarter by 0.11 and 0.08 percent, respectively.

The government expects several major infrastructure projects on offer this year to help Indonesia's economy achieve 5.5 percent growth this year, and accelerate by an average of 6 percent during the next five years. The country's economy grew 5.13 percent in 2004 with a GDP of some Rp 2.30 quadrillion (about US$242.4 billion).

Slamet said the BPS noted that the country's economy had begun to shift from being driven by consumption to investments and exports.

The agency reported that fixed capital formation increased by 14.98 percent, as compared to the growth in household consumption of only 3.22 percent. Government consumption also slumped to 8.52 percent growth.

"But the slow growth in government consumption is mainly due to the fact that many budget allocations have not been disbursed yet and we expect it to rise in the next quarter," he said.

Exports also continued to be strong, the BPS reported, growing by 13.39 percent, although this was offset by growth in imports of 15.38 percent.

"But most of the imports consist of capital investment that will further add to the economy's stock from the supply side, before the demand side starts to kick in," he said, forecasting further growth in the coming quarters because of this condition.

Data from the Investment Coordinating Agency shows that foreign direct investment nearly doubled in the first four months of this year, with the government approving $4.94 billion in foreign investments during this period, as compared with $2.59 billion in the first four months of last year.