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Economy accelerates faster, optimism returns

Driven by an increase in consumer spending, the country’s economic growth accelerated faster in the third quarter after losing speed for more than a year on the back of sluggish exports.

The period saw the economy expanding by 4.2 percent compared to the same period last year and by 3.9 percent from a quarter earlier, the Central Statistics Agency (BPS) revealed Tuesday.

The BPS recorded Rp 1,452.5 trillion (US$154 billion) in GDP in the third quarter this year, giving a total of Rp 4,131.1 trillion in cumulative gross domestic product.

Previously, yearly economic growth slowed down gradually, beginning with 6.4 percent in the second quarter of last year, 6.1 percent in the third quarter and 5.2 percent in the fourth quarter. Subsequently the first quarter saw growth at 4.4 percent followed by 4 percent in the second quarter.

BPS said the acceleration in the third quarter was largely driven by government and household spending, which grew by 10.2 percent and 4.7 percent year-on-year respectively, prompted by the general election and the fasting season of Ramadan.

Investment also saw positive improvement, growing by 9 percent compared to a year before. On the downside, exports and imports in the third quarter remained on a downward trajectory, contracting by 8.2 percent and 18.3 percent year-on-year respectively.

BPS deputy chairman on balances and statistical analysis Slamet Sutomo said the country’s economy may grow slower in the fourth quarter as there would be no more impetus left to propel it higher.

Slamet’s statement differed from a forecast stated earlier this week by Finance Minister Sri Mulyani Indrawati. She said the economy might accelerate more to between 4.6 percent and 4.7 percent growth in the final quarter.

She argued that the country’s economy was heading towards full recovery in the final quarter, faster than most economies in the world due to Indonesia’s strong economic fundamentals.

This would consequently show an unusual growth trend, Mulyani said, instead of the traditionally slower growth in the fourth quarter. Overall therefore, full-year growth might reach 4.3 percent, she said.

Albeit predicting slightly slower growth in the final quarter, Slamet confirmed the economy would likely still grow above four percent.

The BPS also revealed Tuesday a survey on business players’ confidence on the economy, saying the Business Tendency Index increased to 112.86 in the third quarter this year, up from 110.43 in the second quarter, indicating improvements in business conditions.

An index result of more than 100 represents business optimism, Slamet said. “In the third quarter, indices in business sectors were recorded above 100. Businesspeople have regained their confidence,” he said.

Published on the Jakarta Post 11/11/2009

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