May 6 (Bloomberg) -- Indonesia’s economy grew at the slowest pace in more than two years last quarter as slower exports and government spending countered gains in consumption and investment.
Gross domestic product increased 6.02 percent in the first three months of 2013 from a year earlier, the Central Bureau of Statistics said in Jakarta today. That compares with a 6.11 percent pace reported previously for the fourth quarter of 2012 and the median estimate of 6.1 percent in a Bloomberg News survey of 26 economists.
Faltering expansion in Southeast Asia’s largest economy may make it more difficult for President Susilo Bambang Yudhoyono to implement a planned cut in fuel subsidies, with Standard & Poor’s last week lowering its outlook on the country’s rating as it cited a stalling in reforms. At the same time, higher fuel prices may increase price pressure even as growth eases.
“Exports are still underperforming and government spending is still not up to speed,” said Euben Paracuelles, a Singapore-based economist at Nomura Holdings Inc. “They could grow much more if they had some spending on infrastructure and a few other reform measures,” he said, adding that the data would make the central bank “even more reluctant” to raise rates.
The rupiah advanced 0.1 percent to 9,734 per dollar as of 11:59 a.m. in Jakarta today, according to prices from local banks compiled by Bloomberg. It has gained about 0.6 percent this year. The Jakarta Composite Index gained 1.2 percent.
Indonesia’s GDP rose 1.41 percent last quarter from the previous three months, compared with the 1.5 percent median estimate of 11 economists surveyed by Bloomberg.
Household consumption grew 5.17 percent in the first quarter from a year earlier, while investment rose 5.9 percent, Suryamin, chairman of the statistics office, said today. Government spending increased 0.42 percent.
Overseas shipments fell the most in seven months in March, while imports dropped the most since 2009, the statistics department said last week. The country is the biggest producer of palm oil, and its commodity exports include coal, rubber, tin and cocoa. The Standard & Poor’s GSCI gauge of 24 commodities in April had its biggest decline in 11 months.
The International Monetary Fund last month lowered its forecasts for global growth in 2013, while China and the U.S. expanded less than analysts estimated last quarter. The euro-area economy will shrink more than previously estimated in 2013, the European Commission said May 3.
Indonesia’s government may cut its 2013 growth target to a range of 6.3 percent to 6.5 percent, from 6.8 percent earlier, Deputy Finance Minister Mahendra Siregar said April 24.
Yudhoyono said last week he will only increase fuel prices after Parliament approves compensation programs for the poor, a move that could delay efforts to contain a budget deficit that may be more than twice as much as estimated without subsidy cuts. Failure to reduce subsidies last year drained government finances and led to a record current-account shortfall, hurting the rupiah as foreign investors lost confidence.
Indonesia’s investment climbed 30.6 percent to 93 trillion rupiah ($9.6 billion) in the three months ended March 31 from a year earlier, M. Chatib Basri, chairman of the Investment Coordinating Board, said April 22.
Bank Indonesia will probably hold interest rates at a record-low 5.75 percent when policy makers meet May 14, according to all economists in a separate survey. Consumer price gains eased to 5.57 percent last month from a year ago.
“The central bank needs to keep its benchmark rate at the current level and use other tools to curb inflation expectations as the economy needs stimulus from domestic activities,” said Destry Damayanti, chief economist at PT Bank Mandiri in Jakarta.
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