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Indonesia's economy grew 6.7% in 4th quarter JAKARTA - Indonesia's economy expanded at its fastest pace in at least four years in the fourth quarter as the cheapest credit since 1998 spurred consumers to increase spending on goods including cars, motorcycles and mobile phones. Southeast Asia's largest economy grew 6.7 percent in the three months ended Dec. 31 from a year earlier, the statistics office said in Jakarta. The economy expanded 5.1 percent last year, the most since 1996.
Faster growth may create jobs for the fifth of Indonesians without full-time work. Rising consumer spending, which makes up 66.5 percent of the economy, is prompting companies including PT Matahari Putra Prima, the nation's biggest retailer, to expand. ``Private consumption and investment are still driving gross domestic product growth,'' said Anton Gunawan, chief economist at Citigroup Inc. in Jakarta. ``Real wages are positive and increasing especially in the cities, and demand for non-food items like motorcycles and electronics is increasing. We don't expect private consumption to decrease in the near future.''
Fourth-quarter growth was faster than the median 5.2 percent growth forecast in a Bloomberg survey of 12 economists. Consumer spending rose 4.9 percent last year, the statistics office said. Government spending on roads, schools, and other infrastructure expanded 2 percent.

Growth

The Dec. 26 earthquake and tsunami may restrain growth in 2005 to 5 percent, the World Bank said on Jan. 18, less than the 5.4 percent the lender forecast earlier. The disaster left as many as 234,730 people dead or missing in Indonesia. The government said it's sticking to its forecast of 5.5 percent growth. President Susilo Bambang Yudhoyono, who came to power in October, wants growth to average 6.6 percent a year in the next five years as he creates more jobs, he said today in Singapore. The economy expanded a revised 4.9 percent in 2003. Growth in the fourth quarter accelerated from a revised 5.1 percent in the previous three months.
``Consumption is picking up supported by financing institutions offering cheap credit and credit cards,'' said Danny Kojongian, a director at Matahari, in an interview Feb. 14. ``People are more confident now. The new government is providing a more stable environment for business in Indonesia.''

Promises

Matahari plans to open as many as 10 hypermarkets this year to compete with overseas rival Carrefour SA, and another 11 department stores, boosting sales of food, clothing and household items by around 20 percent this year, Kojongian said. PT Astra International, the nation's biggest auto distributor, said on Jan. 14 car sales rose 36 percent in Indonesia last year and on Jan. 11 forecast profit rose 10 percent from 4.4 trillion rupiah in 2003. Most car and motorcycle purchases are financed by loans. Yudhoyono defeated former President Megawati Soekarnoputri in a September election on promises to create jobs, fight corruption and spur foreign investment.

Investment

Concerns about security and corruption have hampered Indonesia's recovery from the 1997-98 Asian financial crisis. About 40 million of its 238.5 million people are jobless or without regular work, and foreign investment slumped to $10.3 billion in 2004, a quarter of the amount Indonesia got in 1995. Fitch last month upgraded Indonesia's foreign- and local- currency ratings by one step to BB-, three levels below investment grade, citing efforts to cut the budget deficit and hasten growth. Standard & Poor's in December lifted its long- term foreign currency debt rating to B+, four levels below investment grade.
A higher rating may reduce borrowing costs for companies and the government and help Indonesia woo the foreign investors needed to fund $150 billion of investment in roads, power plants and other infrastructure projects planned in the next five years.



Posted in Economy @ 16 February 2005 00:01 CET by Jeroen · 'Blog' RSS feed · permalink






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