Indonesia's gross domestic product (GDP) growth recorded at 5.02 percent in 2019, lower than 5.17 percent achieved in 2018 - Photo: Special

JAKARTA (TheInsiderStories) – Indonesia’s gross domestic product (GDP) growth slipped to 5.02 percent in 2019, lower than 5.17 percent achieved in 2018, statistics agency data showed today (02/05). The figure is short of the government’ 5.3 percent target despite supportive efforts by policymakers that included four rate cuts by the central bank.

While in the fourth quarter (4Q), Southeast Asia’s largest economy growth recorded at 4.97 percent, shrank 1.74 percent from 5.02 percent in the previous quarter. This was the first quarterly contraction since 1Q 2019, as net exports contributed negatively to the GDP, while private consumption was nearly flat.

The government has gradually pared back its 2019 growth forecast from 5.3 percent earlier in the year, citing waning global demand and the United States (US) and China trade war. The government is projecting growth of 5.3 percent this year, but finance minister Sry Mulyani Indrawati said Wednesday that there are downside risks to the forecast because of the coronavirus crisis.

“Slowing global trade amid the US-China tariff dispute had hurt Indonesia’s important commodity exports, while national elections delayed investment decisions,” the minister said, adding the coronavirus outbreak will hit the country’ growth this year.

Indonesia’s central bank cut interest rates four times beginning in July to support the economy, reversing part of the 175 basis points of tightening carried out in 2018. Governor Perry Warijiyo said Wednesday further easing is possible as the bank assesses the spread of the Wuhan coronavirus.

“Bank Indonesia will maintain an accommodative macroprudential policy stance and strengthen coordination with other relevant authorities in order to maintain the financial system stability and stimulate the bank intermediation function,” he said.

Meanwhile, household spending, which accounts for more than half of GDP, grew by 5.04 percent last year, stagnant compared to the 5.05 percent in the previous year because of lowering vehicle sales. Investment – the second largest contributor to GDP growth – expanded 4.45 percent last year, a far cry from the 6.67-percent growth recorded in 2018.

Government spending grew 3.25 percent from 4.8 in 2018, while exports and imports contracted 0.87 percent and 7.69 percent, respectively, last year.

Meantime, the data in 4Q shows that on the expenditure side, export fell 2.55 percent from 11.06 percent in the previous quarter, while imports rose 3.4 percent from 6.17 percent in 3Q, the data showed. Private consumption was nearly flat 0.04 percent from 3.08 percent in 3Q while fixed investment growth slowed 3.69 percent from 5.98 percent.

Meantime, government spending rose 37.05 percent, after a 0.81 percent fall in 3Q. On the output side, activity fell for agriculture 20.52 percent from 1.05 percent earlier, mining & quarrying down 1.52 percent from 3.38 percent, manufacturing fell 1.63 percent from 3.18 percent, and wholesale & retail trade fell 2.32 percent from 2.85 percent earlier.

In contrast, production grew for electricity and gas of 3.68 percent from 4.94 percent, construction 94.74 percent from 4.76 percent, transport & storage of 1.09 percent from 3.24 percent, and financial services and insurance of 2.18 percent from 4.66 percent earlier.

Written by Lexy Nantu, Email: lexy@theinsiderstories.com