Indonesia posts 5% growth in Q3

The budget cut announced in August by Finance Minister Sri Mulyani, for the whole of 2016.

China grew at a steady 6.7 per cent annually in the third quarter, midway between the government’s goal of 6.5 to 7 per cent.

Singapore’s growth came in at just 0.6 per cent year on year. South Korea grew 0.7 per cent, marginally ahead of expectations but still a tad below the second quarter.

Household spending rose 5 per cent in Indonesia, the data showed. But a reversal in government spending was a drag on the economy.

In August, Finance Minister Sri Mulyani announced a US$10.2 billion (S$14.3 billion) budget cut for the year. “She took the decision to cut government spending, to make sure the aggregate deficit for the year would not exceed 3 per cent of GDP,” OCBC economist Wellian Wiranto wrote in a note. Government spending tumbled 45 trillion rupiah (S$4.75 billion) in the third quarter year on year, data showed.

Indonesia’s economy has been hobbled by low global commodity prices, tepid foreign investment and infrastructure bottlenecks. Last year’s growth of 4.8 per cent was the weakest since 2009.

President Joko is seeking billions of dollars to help fund an ambitious agenda to build roads, railways and seaports, Bloomberg reported.

Reacting to the data yesterday, he said he hoped for a lift in the fourth quarter. “We hope with the trigger of (government) payment realisation and budget disbursement, it can improve slightly.”

A total of six interest rate cuts by Bank Indonesia this year are helping spur spending as inflation remains inside the 3 per cent to 5 per cent target band.

Analysts argue that revenue collection from the government’s flagship tax amnesty scheme could help cushion the economy from aggressive state spending cuts.

“The cuts in spending would continue to weigh on the fourth quarter outlook, but stabilisation of oil and commodity prices should bode well for the overall economy,” UOB economist Ho Woei Chen said.