Indonesia's Q2 GDP growth disappoints

JAKARTA: Indonesia’s gross domestic product (GDP) grew more slowly than expected in the second quarter, as private consumption remained lethargic, adding to signs that Southeast Asia’s largest economy is stuck in a low gear and may need more stimulus.
The resource-rich economy grew 5.01% in April-June from a year earlier, slightly slower than forecast and unchanged from the first quarter’s pace.
Indonesia has been struggling to accelerate growth to create more jobs for its 250 million population, but analysts say a 5% growth rate, the level produced every quarter since the start of 2014, is not enough.
President Joko Widodo promised to revive growth to 7% during his five-year term, which ends in 2019. This year, he set a target of 5.2%. But some economists said even that could be hard to achieve, and authorities are already hinting at further monetary easing and spending to support the economy.
“All in all, full-year GDP growth in 2017 looks set to reach only 5-5.1%,” said Rangga Cipta, an economist with Samuel Sekuritas here.
Private consumption, which accounts for more than half of Indonesia’s GDP, expanded slightly faster in the second quarter compared to the first quarter, but grew more slowly against a year earlier.
Government and central bank policymakers have publicly stated their bewilderment at why people weren’t spending as much as expected, especially as the Muslim fasting month of Ramadan – traditionally the peak of consumption in Indonesia – fell in May-June in 2017.
During the second quarter, inflation remained comfortably in the central bank’s 3-5% target, while investment and exports improved. Some officials described the sluggish consumption as “a mystery”.
Gundy Cahyadi, DBS economist in Singapore, said for now he maintains a 5.1% GDP growth forecast for the year, but sees “more downside risks” to its 5.4% outlook for next year. – Reuters