Indonesia Q3 GDP grows at slowest pace in 5 years

A man rides a bicycle past residential apartment buildings under construction in Jakarta, Indonesia.
Dimas Ardian | Bloomberg | Getty Images
A man rides a bicycle past residential apartment buildings under construction in Jakarta, Indonesia.

Indonesia's gross domestic product grew 5.01 percent in the third quarter from a year earlier, its slowest in five years, highlighting the challenge that the new President Joko Widodo faces trying to turn around Southeast Asia's largest economy.

Growth in the G20 economy has trended lower since a peak in 2010 as exports suffered from weak global demand, while a wide current-account deficit plus political uncertainty in an election year has unnerved investors.

"We doubt that growth will slow much further from here, but we don't expect it to rebound either," said Gareth Leather, an economist at Capital Economics, adding that exports are likely to remain weak.

Exports were 0.7 percent lower in the third quarter from a year ago, following on from a fall of 1.04 percent in the second quarter.

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Imports were down 3.63 percent in the third quarter from a year ago, after 5.02 percent fall in the second quarter.

Elected in July and sworn in late last month, Widodo has pledged to boost economic growth to 7 percent on average during his five-year-term.

In the previous quarter, gross domestic product (GDP) grew slightly quicker at 5.12 percent, but was also the slowest rate since the third quarter of 2009.

During July to September, investment rose 4.02 percent in the third quarter from a year ago, and down from the second quarter rate of 4.53 percent. It had been growing twice as fast two years ago.

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Growth in private consumption, which accounts for more than half of the GDP, decelerated slightly.

The data also showed that growth in manufacturing and several services sector slowed, most notably trade, transport and communication, and financial services .

Annual growth in manufacturing, which accounts for almost a quarter of GDP, slowed to 4.61 percent in the third quarter, compared to 5.04 percent in the second quarter.

Mining sector gained in the third quarter, growing 0.31 percent after contracting in the first half of the year, after PT Freeport Indonesia and PT Newmont Nusa Tenggara reached an agreement with the government to resume exports of copper concentrates.

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Analysts also doubt whether the central bank will be able to adopt policies supportive of growth, given the need to dampen inflation, with expectations that regulated fuel prices will be raised soon.

The government's near-term focus is on regaining investors' confidence through reforms of the bureaucracy to cut red tape, Coordinating Minister of Economics Sofyan Djalil told a press briefing last Friday.

The president recently visited the Investment Coordinating Board on one of his signature "spot checks" to ensure that the agency is going to be ready to serve as one-stop investment service.