UPDATE 1-Indonesia Q3 GDP picks up, limited impact on rates

By Adriana Nina Kusuma and Gde Anugrah Arka JAKARTA, Nov 10 (Reuters) - Indonesia's annual economic growth picked up in the third quarter for the first time in five quarters, as record low interest rates and political stability underpinned investment while a slump in exports moderated. The growth was broadly in line with expectations and so would not change expectations for the central bank to hold off on raising rates until next year, analysts said. The statistics bureau said gross domestic product in Southeast Asia's biggest economy rose 4.21 percent from a year earlier. Analysts had expected a rise of 4.15 percent. That compared with a revised 4.04 percent increase in second-quarter data, the weakest annual growth in six years as Indonesia felt the impact of the global downturn. Asian economies have shown strong signs of picking up in the third quarter as they lead the world in recovering from the financial crisis. South Korea's growth was the strongest in more than seven years and China expanded at close to 9 percent. Bond yields were largely unchanged, while the rupiah slipped marginally to 9,430 per dollar at 0734 GMT after the data announcement. Stocks, which has been little changed before the news, were down 0.3 percent after the announcement. "Looking ahead, growth in Q4 is expected to remain on the recovery path," said Joanna Tan, economist at Forecast Pte in Singapore. "The government is expected to continue with fiscal support for the economy, though monetary policy may turn hawkish in Q1 next year given inflationary risks and the global monetary policy landscape. I am still looking at a rate hike somewhere in Q1." Indonesia's central bank (BI) signalled last week -- after keeping rates unchanged at a record low of 6.5 percent -- that it was not in a hurry to start hiking rates and talked about a further decline in near-term price pressure. Analysts had expected the central bank to keep rates unchanged until the end of the year and start hiking the benchmark overnight rate by 25 basis points by the end of the first quarter to 6.75 percent. STRONG CONSUMER SPENDING The statistics bureau said consumer spending in the third quarter rose at an annual rate of 4.75 percent, dipping slightly from the preliminary annual figure for the second quarter. Investment rose 3.95 percent, compared with 2.7 percent based on preliminary figures for the second quarter. Indonesia's biggest cement maker Semen Gresik posted a 7.6 percent rise in cement sales in the third quarter from a year ago. Consumer confidence was also strong during the period, hovering near five-year highs. Analysts expected the strong growth figures to help sustain sentiment for the rupiah, Asia's best performing currency this year. "The local currency vis-a-vis the US dollar should move towards its stronger side in tandem with growth pick-up, barring any unforeseen sustained comeback of risk aversion," said economist Enrico Tanuwidjaja of OCBC in Singapore. Analysts expected the U.S. Fed's stance to keep interest rates low was also likely to provide support for the high-yielding rupiah, Asia's best-performing currency this year, and underpin demand for local currency bonds. (Additional reporting by Dicky Kristanto; Editing by Sara Webb) (([e-mail]; Reuters Messaging: [e-mail]; [phone] ext 911)) Keywords: INDONESIA ECONOMY/GDP (If you have a query or comment on this story, send an email to [e-mail]) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved.

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