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Indonesia GDP growth slows in first quarter

The latest figures present another challenge to Indonesia's President Joko Widodo
AFP

Jakarta (AFP) – Indonesia’s first-quarter GDP growth slowed on the back of a contraction in exports and public spending, the government said Monday, despite efforts to rev up Southeast Asia’s biggest economy.

The latest figures present another challenge to Indonesia’s President Joko Widodo who came to office in 2014 on a pledge to boost annual growth to seven percent.

But Indonesia’s commodity-driven economy has been stuck in the 5.0 percent growth range despite repeated interest rate cuts by the central bank over the past couple of years.

On Monday, Indonesia said its economy grew 5.06 percent in the January-March period, slightly off a 5.2 percent growth rate it saw in the previous three months, as lacklustre consumer spending also weighed on activity.

“We see little prospect of a rebound,” Gareth Leather, a senior Asia economist at London-based consultancy Capital Economics said in a report after the data were published.

“Although the decent prospects for the global economy should help to support export volumes, subdued prices for Indonesia’s main commodity exports (especially palm oil) mean revenues are likely to remain low by past standards.”

The country is the world’s biggest producer of palm oil — used in everything from food to cosmetics. But the commodity has been facing a backlash over the environmental impact of massive land clearing to grow the crop.

Despite the lack of pick-up in growth, Indonesia last month won a credit rating upgrade from Moody’s which pointed to efforts at keeping budget deficits and inflation under control.

Widodo has launched an ambitious bid to upgrade Indonesia’s creaking infrastructure and boost tax revenue, but the sprawling nation still struggles with endemic corruption, poverty and lacklustre education standards.

“Further ahead, growth will depend on the government’s progress in addressing Indonesia’s long-standing structural issues,” Leather said.

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