China’s economic slowdown is weighing on the outlook for Indonesia’s exports even as the Southeast Asian nation’s trade balance improves, Finance Minister Chatib Basri said.
“What we need to watch carefully is the slowdown in China,” Basri said May 2 in an interview with Bloomberg News in Astana, Kazakhstan, where he is attending the Asian Development Bank’s annual meeting. The slower pace of growth in Asia’s largest economy is the biggest concern for Indonesia’s exports this year, he said.
China’s gross domestic product is projected by analysts to grow 7.3 percent in 2014, less than the government target of about 7.5 percent, as authorities control credit. Meanwhile, Southeast Asia’s largest economy started to regain investor confidence this year as national elections spur spending, and the biggest rate-tightening cycle in eight years in 2013 helped rein in the current-account shortfall and damp inflation.
Indonesia’s trade surplus in February and March is “not temporary” and showed the government’s policies, including fiscal measures to curb imports, are working to make the country’s trade more balanced, Basri said. Efforts to narrow the current-account deficit will continue, as it has to fall to 2.5 percent to 3 percent to ensure sustainable growth, he said.
The gap in the broadest measure of trade may be about 2 percent of GDP in the first quarter, narrowing from 3.3 percent in the previous three months, Perry Warjiyo, deputy governor at Bank Indonesia, said on April 21.
The central bank kept its key interest rate unchanged for a fifth straight meeting earlier in April, extending a pause in monetary tightening as inflation slowed. This year “we will continue to tighten on both sides -- fiscal side and also monetary side,” Basri said.
The economy probably grew 5.7 percent to 5.8 percent in the first quarter, Basri said, adding that he didn’t “expect GDP will go beyond 6 percent” this year.
GDP data are due to be released tomorrow. The median estimate in a Bloomberg survey is 5.6 percent from a year earlier, from a pace of 5.7 percent in the previous three-month period.