JAKARTA: Indonesia's economic growth slipped to its weakest in over two years, broadly meeting expectations, data showed on Tuesday (Nov 5), signalling more monetary and fiscal stimulus is on the cards over coming months to spur demand knocked by a global slowdown.
Gross domestic product (GDP) rose 5.02 per cent in the three months ended September from the year-ago quarter, the weakest pace since the second quarter of 2017, the statistics bureau reported.
The figure was close to the 5.01 per cent growth expected in a Reuters poll and compared with the 5.05 per cent expansion in the second quarter.
Though Indonesia – Southeast Asia's largest economy – relies more on domestic demand, its growth has also been hurt by slowing global trade as the US-China tariff dispute shattered its exports. That in turn has dented consumer sentiment and overall domestic consumption.
Some economists said the data pointed to a need for further fiscal and monetary stimulus.
"We think policymakers will want to utilize all possible instruments at hand to support growth," said Bank Danamon economist Wisnu Wardana, noting that all "productive engines" in the economy decelerated.
The fiscal policy imperatives would be under scrutiny given the central bank had already been cutting rates, he said.
Bank Indonesia (BI) has cut interest rates four times by a total of 100 basis points since July and is expected to ease again in coming months.
ANZ analysts said while the data backed its expectation of further monetary easing, GDP growth was likely to stay stuck around 5 per cent without a rebound in commodity prices or global growth.
The rupiah firmed up slightly after the data from 14,020 a dollar to 14,005 by 0600 GMT. The main stock index climbed to 6,219 before the midday break, from 6,201 ahead of the announcement.
WIDODO UNDER PRESSURE
President Joko Widodo, who won re-election in April promising more investment opportunities, is under pressure to avoid a sharp downturn.
However, Widodo, who has been warning his cabinet members of the risks of a global recession, has little headroom to open the fiscal spigot as government income has been hit by weak corporate earnings and the broader slowdown.
In the third quarter, growth in household consumption, which makes up over half of Indonesia's GDP, eased slightly to 5 per cent, from 5.2 per cent. Government spending and investment also slowed.
Exports were flat, while imports plunged.
At his inauguration last month, Widodo reiterated his ambitious plans of making Indonesia one of the world's top five economies by 2045 with a GDP worth US$7 trillion.