Business

Indonesia's growth picks up pace in third quarter

  • 5 November 2015
  • From the section Business
Indonesian market Image copyright AFP
Image caption Indonesia's growth of 4.67% in the third quarter is below the average of 5.8% seen over the past decade

Growth in South East Asia's largest economy, Indonesia, picked up in the third quarter, improving upon the previous one which saw the lowest growth in six years.

It grew 4.73% from July to September compared with a year ago, after hitting 4.67% growth in the second quarter.

Weak consumer spending, slumping commodity prices, along with high interest rates have impacted growth.

President Joko Widodo has pledged to lift annual growth to 7% on average.

He made that promise when his five-year term began a year ago, but has faced challenges starting large infrastructure projects and boosting government spending.

In September, Mr Widodo reshuffled his cabinet to speed up government spending.

The government said that spending did accelerate in the third quarter.

Missing expectations

The annual figure was, however, lower than the 4.79% expected by a poll of Reuters analysts. This compares to an average of 5.8% growth recorded over the past decade.

Growth on a quarterly basis of 3.21% also missed expectations.

Gareth Leather, economist at research firm Capital Economics said Indonesia's growth still remains weak and is unlikely to turn around.

"With tight monetary policy and low commodity prices likely to remain a drag on the economy, we expect growth to remain stuck at around 4.5-5% over the next few years," he said.

But earlier this week, Indonesia's chief economic minister Darmin Nasution said the central bank does have room to cut interest rates if inflation eased in October.

The central bank has not moved on interest rates since February, but calls have to growing to boost the economy that relies on domestic consumption as its biggest contributor.

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