Indonesian Growth Beats Estimates as Widodo Lifts Spending

  • Benchmark stock index extends gains after GDP report
  • Economy grew 5.04 percent in fourth quarter from year earlier

Joko Widodo, President of Indonesia.

Photographer: Dimas Ardian/Bloomberg

Indonesia’s economic growth surpassed analyst estimates in the final three months of 2015 as President Joko Widodo stepped up efforts to revitalize Southeast Asia’s biggest economy.

Gross domestic product grew 5.04 percent in the fourth quarter from a year earlier, the statistics bureau said in Jakarta on Friday, exceeding all estimates in a Bloomberg News survey. The economy grew 4.79 percent in 2015, from a previously reported 5.02 pace the year before.

“Not a sheepish end to the year at all,” said Wellian Wiranto, an economist at Oversea-Chinese Banking Corp. in Singapore. “This does point to a strengthening momentum of growth. It’s a good sign that 2016 should see better growth prospects than the previous year.”

The Jakarta Composite Index extended gains after the data to rise 1.8 percent as of 9:50 a.m. local time, heading for the highest close in nearly six months. The rupiah pared losses to trade 0.1 percent lower at 13,653 a dollar, according to prices from local banks. Indonesia’s sovereign bonds rose, pushing the 10-year yield down four basis points to 8.07 percent, the lowest since May 2015, according to the Inter Dealer Market Association.

Since taking office in October 2014, the president, known as Jokowi, has sought to boost foreign investment, infrastructure spending and implement bureaucratic reforms to rejuvenate an economy hit by sliding commodity prices. Government spending rose 7.3 percent in the fourth quarter from a year earlier and surged 41.3 percent from the previous three months. Investment rose 6.9 percent year-on-year.

Household consumption, which makes up more than half of the economy, grew 4.9 percent in the fourth quarter from a year earlier. Exports continued to weaken, falling 6.4 percent, amid the economic slowdown in China and reduced demand for the country’s commodities such as coal and palm oil.

The finance ministry is targeting 5.3 percent expansion in 2016, powered by increased government spending on infrastructure and looser monetary policy at Bank Indonesia. Policy makers cut interest rates in January for the first time in 11 months, and have signaled further easing is possible this year.

“At least we have found a recipe for growth in this uncertain global environment,” Finance Minister Bambang Brodjonegoro told investors, government officials and economists at a dinner on Thursday evening. “We are optimistic that 2016 will be better than last year.”

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