Investment holds Indonesia’s growth trend steady

JAKARTA - Indonesia's growth slowed slightly from 5.27% y/y in Q2 to 5.17% in Q3, broadly in line with expectations. Investment was a key driver of growth, with its pace of expansion picking up from 5.86% y/y in Q2 to 6.96% in Q3. Government consumption growth also accelerated during the same period.

Private consumption growth slowed, but remained solid by recent standards. Inventories also provided a smaller lift to growth.

Meanwhile, export growth edged down, though a sharper moderation in import growth meant that net trade was a slightly smaller drag on growth in Q3 compared to Q4.

An ANZ research report says that, in year-to-date terms, GDP growth came in at 5.17% y/y, suggesting that ANZ's full-year growth forecast for 2018 of 5.2% remains on track.

"However, we expect growth to ease in 2019, to 5.0%," the report says.

"While (Bank Indonesia's) policy response to the weakening of the IDR in recent months has helped stabilise the currency, it is likely to be a constraint on growth.

"For instance, Government measures to reduce imports by raising tariffs on selected consumer goods, delaying import-intensive infrastructure projects will dampen domestic demand.

"Tightening liquidity conditions following the central bank's cumulative 150bps in rate hikes since May also present a headwind to growth."

ANZ says that recent gains in the IDR suggest Bank Indonesia (BI) is likely to stay on hold at its meeting next week.  www.live.anz.com (ATI).