Indonesia GDP Grows Less Than 6%, Rupiah on the Slide

Indonesia’s economy expanded less than 6 percent last quarter as higher interest rates weighed on consumption and exports fell.

Gross domestic product increased 5.62 percent in the three months ended Sept. 30 from a year earlier, the Central Bureau of Statistics said in Jakarta on 5 November. That compares with a previously reported 5.81 percent pace for the second quarter and the median estimate of 5.6 percent in a News survey of 23 economists.

The third-quarter data highlights the vulnerability of Southeast Asia’s largest economy as it weathers a depreciated exchange rate, faster inflation and diminished foreign capital inflows ahead of elections in 2014. Bank Indonesia has raised its benchmark rate by 1.5 percentage points since early June to shore up the rupiah and stem price gains, while the government has acknowledged growth next year will be slower as it reins in spending to narrow a record current-account gap.

Indonesia will hold parliamentary elections in April and a presidential one in July. President Susilo Bambang Yudhoyono, whose party won the 2009 poll and who can’t run for a third term, is seeing his legacy of economic stability threatened by the sliding rupiah and current-account deficit.

The World Bank said last month downside risks to Indonesia’s economic outlook are sizeable, as higher borrowing costs and inflation may have a greater-than-expected effect on domestic demand. Inflation remained above 8 percent for a fourth month in October. Exports have dropped for 18 consecutive months.

Foreign direct investment into Indonesia rose 18.4 percent last quarter from a year earlier, after increasing about 19 percent in the April-June period.