Indonesia on pace to hit targets
The country’s economic growth steadied in the third quarter, boosted by strong consumer spending and rising exports that countered arguments of weak global demand.

Gross domestic product rose 6.5 percent in the July-September period from a year earlier, the Central Statistics Agency (BPS) reported on Monday. That rate matched the growth in the second and first quarters.

Still, annual growth in the third quarter was slightly lower than the central bank’s earlier prediction of 6.6 percent.

“Although lower than consensus and Citi expectations, the third-quarter number still seems respectable in our view,” said Helmi Arman, country economist at Citibank Indonesia.

The latest growth figure suggests that Indonesia’s economy is on track to meet the government’s growth target of 6.5 percent for 2011. Meanwhile, economies in other Asian nations, including China and India, are expanding at slower rates due to accelerating inflation and high interest rates.

Helmi forecast the country’s economic growth at 6.5 percent this year but just 6.3 percent in 2012. He highlighted two significant challenges: slowing global economic growth and the risk that rice prices will continue to rise after lower than expected production this year.

Data from the BPS showed that household consumption, which accounts for two-thirds of GDP, increased 4.8 percent, up from a 4.6 percent increase in the previous quarter. Exports rose 18.5 percent during the third quarter, up from a 17.4 percent increase in the second quarter.

However, investment grew 7.1 percent in the third quarter, which was slower than the 9.2 percent growth in the second quarter, while government spending grew at an annualized 2.5 percent, also slower than the 4.5 percent annual growth in the second quarter.

“This [third-quarter GDP] confirms Indonesia’s resilience to external weakness,” said Dariusz Kowalczyk a Hong Kong-based strategist at Credit Agricole CIB.

“But it is a bit below consensus, a minor negative for the rupiah,” which could face pressure if the central bank cuts rates, he said.

The rupiah has weakened about 5 percent against the dollar in the past three months, similar to the declines of most other Asian currencies, as investors tend to dump emerging-market assets amid uncertainty in the global economy.

Still, domestic demand is strong in Indonesia as consumers buy more durable goods. Car sales in the July-September period rose 30 percent to 242,172 units from a year earlier, according to the Association of Indonesia Automotive Industries (Gaikindo).

The unemployment rate fell to 6.56 percent of the total 117.4 million work force as of August 2011, compared the 6.80 percent unemployment in February 2011, BPS data show.