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POLL-Indonesia Q3 GDP seen weakening amid global slowdown

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Indonesia's economic activity likely slowed for a third straight quarter in the July to September period, hit by weakening consumption and shrinking exports as global economic growth cooled, a Reuters poll showed on Friday.

By Tabita Diela

JAKARTA, Nov 1 (Reuters) - Indonesia's economic activity likely slowed for a third straight quarter in the July to September period, hit by weakening consumption and shrinking exports as global economic growth cooled, a Reuters poll showed on Friday.

The resource-rich country has been trying to lift growth in gross domestic product (GDP) significantly, but despite heavy infrastructure investment, the pace has stayed at about 5% in recent years.

In the third quarter, Southeast Asia's biggest economy probably expanded 5.01% year-on-year, the median forecast of 17 analysts in the poll showed, compared with 5.05% in the previous three months.

"Although high-frequency data suggest that investment growth has stabilised, monthly retail sales data and softening consumer confidence signal that private consumption growth has eased," ANZ wrote in a note to clients on Friday, describing its 5.02% growth forecast as "sluggish".

Household consumption, which makes up more than half of Indonesia's GDP, was boosted by election-related spending in the previous two quarters. Such spending had dried up in the third quarter.

Motorcycle and car sales, indicators of consumption, contracted 1.5% and 10% year-on-year respectively in the July to September quarter, while retail sales barely rose.

"The price increase of non-food products was below the national inflation rate, but because purchasing power was weak, there were barely any sales," Tutum Rahanta, deputy chairman of the Indonesian retailers' association said by telephone.

In a rare bright spot, data by the country's investment board showed foreign direct investment increased at the fastest pace in four years in the third quarter, bolstered by investments in logistics and communications.

Bank Indonesia, which has cut interest rates four times since July by a total of 100 basis points, described economic activities as "not very strong".

Its governor Perry Warjiyo trimmed its third-quarter growth forecast slightly to 5.05% from 5.1% previously.

"Expectations for the fourth quarter are better," Warjiyo said last week.

He said investors may begin to realise their business plans in the October to December period following President Jokow Widodo's announcement of the cabinet after his second term inauguration on Oct. 20.

Widodo will be under pressure to raise the growth rate.

The president has put improving the investment climate among his new term's top priorities, promising to simplify the country's regulatory framework, cut corporate tax rates, revise strict labour rules and relax foreign ownership limits in some sectors.

However, the IHS Markit purchasing managers' index (PMI) showed Indonesian manufacturing activity in October shrinking by the most in four years, suggesting the situation may not improve in the final quarter of this year.

The government's latest forecast for full-year 2019 growth was 5.1%, while the central bank's was 5.05%.

(Additional reporting by Nilufar Rizki and Maikel Jefriando in Jakarta; Khusboo Mittal and Shaloo P. Shrivastava in Bengaluru; Writing by Gayatri Suroyo; Editing by Jan Harvey)

((tabita.diela@thomsonreuters.com; +622129927621;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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