JAKARTA—Indonesia's economy continued to expand robustly in the first quarter, supported by rising investments, exports and healthy consumption, the government said, raising the possibility that the central bank may tighten monetary policy.
The official statistics agency said Thursday that Southeast Asia's largest economy grew 6.5% in the quarter ended March compared with the year-earlier period, and 1.5% from the previous quarter. The year-to-year figure was roughly what analysts expected, while the quarter-to-quarter growth was slightly slower.
The first-quarter strength was slightly slower than the 6.9% year-to-year expansion in the fourth quarter, which was a six-year high. Indonesia's fourth-quarter growth is usually higher because the government disburses most of its budget during the last quarter of the year. The figures aren't seasonally adjusted.
"Despite [coming in] lower than market expectation, GDP growth in the first quarter can still be considered as robust," said Standard Chartered economist Eric Alexander Sugandi. "We still retain our full-year GDP growth forecast for 2011 at 6.5%."
The government said that in the first quarter, investment grew 7.3% from a year earlier and exports gained 12.3%, while household consumption rose 4.5%. Government spending grew 3%, with imports expanding 15.6% amid increasing economic activity.
Bank International Indonesia economist Juniman said the government needs to boost its spending later this year to reach its 6.4% economic growth target for the full year. Mr. Juniman, who like many Indonesians uses only one name, is concerned that Indonesia's export growth could be slowed by the recent disasters in Japan, one of Indonesia's largest export markets. He said vehicle sales here will also likely fall this year due to disruptions to the production of vital components in Japan.
Mr. Juniman expressed concern that the rising energy subsidies that the government has to shoulder could limit its capacity to increase spending on infrastructure projects needed to accelerate economic growth.
Meanwhile, HSBC economist Wellian Wiranto said the country's strong household consumption figure suggests Bank Indonesia needs to tighten monetary policy further.
Mr. Wiranto said the consumption offers the central bank a policy-tightening comfort zone. "Moreover, the strength of consumption also tells us that price pressures will hardly go away on their own given the demand-side push."
Indeed, year-to-year core inflation, which better reflects real demand, has been accelerating steadily, reaching 4.62% in April from 4.28% in December, although headline inflation has been easing since February.
Bank Indonesia has been reluctant to raise interest rates, with only one quarter-percentage-point increase in February, as it doesn't want to further attract short-term capital inflows. Instead, the central bank has allowed the rupiah to appreciate to help contain imported inflation.
"While the central bank has been allowing rupiah appreciation to lean into imported inflation, not all price pressures in the economy are imported," said Barclays Capital economist Prakriti Sofat.
The government also said the unemployment rate fell to 6.8% as of February from 7.41% a year earlier. Over the same period, the work force grew to 119.4 million from 116 million, it added.
Source: http://online.wsj.com
The official statistics agency said Thursday that Southeast Asia's largest economy grew 6.5% in the quarter ended March compared with the year-earlier period, and 1.5% from the previous quarter. The year-to-year figure was roughly what analysts expected, while the quarter-to-quarter growth was slightly slower.
The first-quarter strength was slightly slower than the 6.9% year-to-year expansion in the fourth quarter, which was a six-year high. Indonesia's fourth-quarter growth is usually higher because the government disburses most of its budget during the last quarter of the year. The figures aren't seasonally adjusted.
"Despite [coming in] lower than market expectation, GDP growth in the first quarter can still be considered as robust," said Standard Chartered economist Eric Alexander Sugandi. "We still retain our full-year GDP growth forecast for 2011 at 6.5%."
The government said that in the first quarter, investment grew 7.3% from a year earlier and exports gained 12.3%, while household consumption rose 4.5%. Government spending grew 3%, with imports expanding 15.6% amid increasing economic activity.
Bank International Indonesia economist Juniman said the government needs to boost its spending later this year to reach its 6.4% economic growth target for the full year. Mr. Juniman, who like many Indonesians uses only one name, is concerned that Indonesia's export growth could be slowed by the recent disasters in Japan, one of Indonesia's largest export markets. He said vehicle sales here will also likely fall this year due to disruptions to the production of vital components in Japan.
Mr. Juniman expressed concern that the rising energy subsidies that the government has to shoulder could limit its capacity to increase spending on infrastructure projects needed to accelerate economic growth.
Meanwhile, HSBC economist Wellian Wiranto said the country's strong household consumption figure suggests Bank Indonesia needs to tighten monetary policy further.
Mr. Wiranto said the consumption offers the central bank a policy-tightening comfort zone. "Moreover, the strength of consumption also tells us that price pressures will hardly go away on their own given the demand-side push."
Indeed, year-to-year core inflation, which better reflects real demand, has been accelerating steadily, reaching 4.62% in April from 4.28% in December, although headline inflation has been easing since February.
Bank Indonesia has been reluctant to raise interest rates, with only one quarter-percentage-point increase in February, as it doesn't want to further attract short-term capital inflows. Instead, the central bank has allowed the rupiah to appreciate to help contain imported inflation.
"While the central bank has been allowing rupiah appreciation to lean into imported inflation, not all price pressures in the economy are imported," said Barclays Capital economist Prakriti Sofat.
The government also said the unemployment rate fell to 6.8% as of February from 7.41% a year earlier. Over the same period, the work force grew to 119.4 million from 116 million, it added.
Source: http://online.wsj.com
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