Faster Growth Despite Rising External Risks

15 01 2008

indonesia economic forecast 2008

GDP: Accelerating Since the Beginning of the Year

The Indonesian economy picked up its growth pace in 2007. From a growth pace of 6.0 percent in Q1 2007, the economy then expanded by 6.3 percent in Q2 2007 and 6.5 percent in Q3 2007. Nonetheless, in Q4 2007, we expect the Indonesian economy to show slightly slower growth of 6.2 percent as a result of slightly lower-than expected growth in government expenditures and private consumption in that particular quarter. Yet for the whole of 2007, the Indonesian economy is expected to grow by 6.3 percent, or much faster than the 5.5 percent growth pace in 2006.

Compared to other countries in the region, Indonesia is one of the fastest growing economies. Among the “emerging market” countries in Asia, the Indonesian economy ranked fourth in terms of growth over the last three quarters (up to the third quarter of 2007), with only the economies of China, India, and the Philippines growing more briskly than Indonesia’s economy.

Investment has helped drive the Indonesian economy over the last three quarters. Prior to 2006, investment (as measured by gross fixed capital formation) gave only a minimal contribution to economic growth. However, it then picked up significantly in 2007. Looking ahead, investment growth should remain strong. This is because spare capacity has been reduced significantly following the steady rise in domestic consumption since the beginning of this decade. Read the rest of this entry »