Indonesia's Q1 GDP grows at slower pace than forecast

Filepic shows a worker carrying a cart full of sacks of clothes at the Tanah Abang textile market in Jakarta. After years of being overrun by a racketeering mafia, drug addicts and prostitutes, Southeast Asia's biggest textile market is cleaning up its act in an effort to win back droves of shoppers. AFP

JAKARTA: Indonesia grew at a slower pace than expected in the first quarter, a disappointing start to the year as the country aims to get full-year growth back above 5%.

The statistics bureau said on Wednesday that South-East Asia's largest economy expanded an annual 4.92% in the January-March quarter, below the median expectation of 5.05% in a Reuters poll.

The economy grew 5.04% in the final quarter of 2015.

"Our start in 2016 is better than the start of 2015," said bureau head Suryamin. "Economic activity almost always slows in the first quarter, especially after growing higher in the fourth quarter." 

In the first quarter a year earlier, annual growth was 4.73%.

Data from the statistics bureau showed consumption remained weak by March, but a rise in government-led investment helped growth to be stronger than January-March last year. However, investment growth was weaker than the December quarter.

Growth in Indonesia weakened in 2015, to 4.8%, as poor commodity prices, contracting exports, weak investment and waning consumption produced the lowest growth rate since 2009.

In each year since 2011, economic growth has slowed - a trend that the government hopes to end this year.

A cabinet reshuffle in August and a state focus on lifting growth generated some momentum and the economy started to rebound in late 2015, albeit at a moderate pace.

"While the government is doing what it can to support growth, the gravitational pull of a cyclical downturn is much stronger," said Trinh Nguyen, senior economist for emerging Asia at Natixis.

SEEKING MORE INVESTMENT

Realising Indonesia cannot rely on the resource sector for growth any more, President Joko Widodo has worked to expand the country's weak manufacturing sector.

The Finance Ministry has offered many tax incentives and promised a cut in corporate income taxes.

The central bank has cut its key benchmark rate three times in the first quarter, by a total of 75 basis points.

Also, Bank Indonesia has announced it will use a new benchmark in August, an effort to become more effective in getting banks to lower lending rates.

Widodo has pledged to get growth up to 7% a year in 2019, the last year of his term.

The government's target for growth this year is 5.3%, while the central bank's outlook is 5.2%-5.6%.

On Wednesday, the statistics bureau said the unemployment rate was 5.50% in February, from August's 6.18%. - Reuters