Indonesia’s growth stuck in a narrow range: ANZ

May 8, 2018

JAKARTA - At 5.06% year-on-year, Indonesia’s GDP growth came in lower than expected. Gross fixed investment provided an expected boost to overall growth, rising 7.95% y/y from 7.27% in Q4, but total private consumption (which includes non-profit institutions serving households) posted another quarter of lacklustre growth at 5.01% y/y, broadly unchanged from the previous quarter.

Government consumption also moderated to 2.73% from 3.81% in Q4, while domestic demand reported its fastest rise in 13 quarters with growth of 6.34% y/y.

Meanwhile, the overall trade deficit widened, ANZ Bank says in a research note.

“The wider trade deficit resulted in a larger drag from net exports on overall GDP growth,” ANZ says.

“We estimate the negative contribution of net exports to have increased to 1.13% from 0.57% previously.

“Looking ahead, we still expect average 2018 growth at 5.30%, within the centralbank’s 5.10-5.50% growth projection.  (And) we expect further improvement in

investment and fiscal spending to prop up domestic demand.

“Yet, without a significant change in private consumption, we forecast inflationary pressures to remain manageable.

“Accordingly, we continue to expect Bank Indonesia to keep its policy rate unchanged at 4.25% despite rising external risks.

“In our view, the central bank has room to maintain a supportive stance before it commences its hiking cycle in

the latter half of 2019.” (ATI).