Indonesian growth beats forecasts

Indonesia’s second-quarter economic growth beat analysts’ expectations amid President Joko Widodo’s efforts to spur an economy struggling in the wake of a slowdown in China and low commodity prices.

Gross domestic product increased 5.18 per cent from a year earlier, compared with a revised 4.91 per cent in the first three months, the statistics bureau said in Jakarta on Friday. That exceeded the 5 per cent median estimate in a Bloomberg survey of 24 economists.

Widodo, known as Jokowi, oversaw a 36 per cent surge in government spending from the previous quarter as he seeks to lift growth from the slowest level since 2009. The president has embarked on an ambitious infrastructure program and launched a tax amnesty aimed at luring back billions of dollars of undeclared income back to Indonesia. The central bank has cut its benchmark rate by a percentage point this year in an attempt to revive lending.

“The outlook for Indonesia’s economy has improved in recent months, raising hopes that the economy could be on the cusp of a sustained recovery,” said Gareth Leather, senior Asia economist at Capital Economics Ltd. in London. “In particular, the passage of a number of reforms including steps to open up more industries to foreign investment as well as tax incentives to encourage more labour-intensive industries to set up in Indonesia has helped boost sentiment.”

Market reaction

The Jakarta Composite Index extended gains after the figures were released, rising 1 per cent as of 9:57am in the city. The rupiah strengthened 0.1 per cent to 13,120 a dollar, according to prices from local banks. Indonesian sovereign bonds advanced, pushing the 10-year yield down two basis points to 6.89 per cent, Inter Dealer Market Association prices show.