By Andreas Ismar
JAKARTA--The Indonesian economy grew at its weakest pace in
almost five years in the latest quarter, weighed down by an ore
export ban and slowing investment, posing a challenge for the
president-elect, Joko Widodo.
Analysts forecast that the slowdown would continue this year,
with growth in Southeast Asia's largest economy likely to fall
short of last year's expansion, but not disastrously so.
"GDP growth is slowing but not crashing. And personal
consumption growth remains robust," DBS economist Gundy Cahyadi
said Tuesday.
Mr. Widodo, the governor of Jakarta, is set to take office in
October barring a successful court challenge from his rival,
Prabowo Subianto. During the campaign, Mr. Widodo vowed to overhaul
an economy hurt in recent years by a commodities downturn. The
country has been straining to reverse the trend by building up
manufacturing in sectors such as automotive.
"Businesses now see politics is stable" following the election,
said Andrew Nasuri, chief executive of Garuda Mataram Motor, which
sells Volkswagen automobiles in Indonesia. However, the new
government's full impact might not be felt until next year, Mr.
Nasuri added.
The mining sector continued to contract in the latest period,
falling 0.15% from a year earlier following the export ban. The
sector is likely to rebound, however, after the government's recent
agreement to allow Freeport-McMoRan Inc., the biggest copper
producer in Indonesia, to resume exports, said Credit Suisse
economist Santitarn Sathirathai.
He forecasts overall GDP growth of 5% this year, compared with
last year's 5.8% expansion.
In the second quarter, Indonesia's economy expanded a seasonally
unadjusted 5.12% in the second quarter from a year earlier,
compared with 5.22% growth in the January-March period, the
official Central Statistics Agency said Tuesday. This marked the
slowest growth since the third quarter of 2009, when GDP expanded
4.27%. Private consumption, the economy's backbone, grew 5.59%,
similar to the previous quarter's 5.61% gain.
Some economists offered a brighter look at the economy. The
quarter-on-quarter seasonally adjusted annualized rate of GDP
growth was 5.1%, compared with a 3.5% pace in the previous quarter,
according to Barclays.
Despite many economists' expectations for a continued GDP
slowdown, they said Bank Indonesia was unlikely to cut interest
rates, citing the central bank's commitment to keeping the
current-account deficit in check.
Bank Indonesia last year raised interest rates by 1.75
percentage points to 7.50%, a level unseen since early 2009, to
help narrow the country's current-account deficit from an all-time
high of 4.5% of GDP. Economists said, however, that monetary policy
can give only limited support, urging the government to "bite the
bullet" by slashing energy subsidies.
Linda Silaen and I Made Sentana contributed to this article.
Write to Andreas Ismar at andreasismar.sandiwan@wsj.com