JAKARTA, Feb 10 (Reuters) - Indonesia's annual GDP growth accelerated to 5.4 percent in the fourth quarter, above the 4.97 percent forecast in a Reuters poll and compared with 4.2 percent in the third quarter.
KEY POINTS:
* Q4 GDP growth at +5.4 pct y/y, above forecast at +4.97 pct
* Q4 GDP growth -2.4 pct q/q, better than forecast -3.0 pct
* GDP growth in 2009 at 4.5 pct, above forecast at 4.4 pct
For a graphic click on http://graphics.thomsonreuters.com/0210/ID_GDP0210.gif
MARKET REACTION:
- The rupiah was largely unchanged at 9,355 per dollar at 0420 GMT after the data announcement.
- The Indonesia Composite Index was largely unchanged, up just 0.06 percent on the day to 2,490.912 at 0424 GMT.
COMMENTARY:
DAVID SUMUAL, ECONOMIST, BCA
'This is more than expected, and I think this is due to a strong export growth in Q4. I think the hike in commodity price also helped.
'Usually the central bank is ahead of the curve, and looking from this stronger-than-expected growth, I think it will give an impact to the central bank rate, which will be raised mid-year.'
PRAKRITI SOFAT, ECONOMIST AT BARCLAYS CAPITAL, SINGAPORE:
'The Q4 figure is above market expectations. Bulk of the strength comes from consumption, but I do think investment spending has turned around the economy as it has been indicated in indicators such as motor vehicle sales, cement sales and so on.
'Going forward, economic momentum in Indonesia remains very robust, sentiment confidence is strong and also firms are becoming more positive towards investment plans.
'For 2010, we are looking for growth to come in at 6 percent.
'We expect Bank Indonesia to start hiking in Q2 by 25 basis point hike, 100 basis point total tightening through 2010.
'In Q1 2010, we should easily see growth 5.5-6 pct y/y. Seasonally adjusted Q4 number should be 1.5 pct q/q which is the same as Q3.'
SONG SENG WUN, ECONOMIST, CIMB-GK RESEARCH, SINGAPORE
'Last year we were all holding our breath, waiting to see what numbers we would end up with.
'In the case of Indonesia, resilient commodity prices also helped lift income in the rural areas plus we had soaring equities.
'Strong foreign interest and inflows all contributed in some part to the better-than-expected headline numbers.
'Interest rates still will depend on what fuel prices look like going forward. Oil prices are not going through the roof so that takes pressure off the government in terms of fuel subsidies and an initial source of inflation.
'We expect the benchmark BI rate to climb to 7.5 percent by the end of 2010 if inflation climbs to 6.3 percent.
'If commodity prices remain resilient it will still be supportive of growth. I think that in the best case scenario, if there is export recovery and no external shocks from oil, a 6 percent GDP forecast for 2010 is do-able.'
PURBAYA YUDHI SADEWA, ECONOMIST DANAREKSA RESEARCH INSTITUTE
'Our exports was the highest in history in December, and domestic consumption is higher than many have estimated, and the sales of cars and motorbikes have also gone on the rise.
'I am sure investment has started to grow and the economy has started to speed up. I think from the three engines of growth, many have underestimated them.'
DAVID COHEN, ECONOMIST, ACTION ECONOMICS, SINGAPORE
'Today's data is consistent with the sense the Indonesian economy is continuing its strong growth. The growth of 4.5 percent year-on-year is among the best performances around the world, and certainly in the G20 economies.
'The non-seasonally adjusted quarterly figure of -2.4 percent growth reflects a normal seasonal pattern for the fourth quarter. Based on our calculations, this would be around 1.5 percent growth seasonally adjusted.
'We think this continued growth in the economy will keep the markets happy. Like other economies in the region, Indonesia is now getting support from export demand, while domestic demand supported the economy last year.
'We see Bank Indonesia's forecasts of 5-5.5 percent GDP growth for 2010 as still perfectly reasonable.
'Today's data will have no immediate impact on interest rates. We continue to look for Bank Indonesia to begin to hike in the third quarter.'
TIM CONDON, ECONOMIST, ING FINANCIAL MARKETS, SINGAPORE
'We were looking for about 5.23 percent year-on-year growth for Q4. Our number was a little bit higher than consensus forecast but the number that came in was even better than our forecast. Better-than-expected growth is unambiguously positive.
'I think the crash of Q4 2008 is behind us, the government responded to that very quickly and that has enabled private consumption to hold up better than expected. It's a domestic demand story.
'Our thinking is that this allays concerns in Bank Indonesia about growth. Accelerating inflation will increasingly dominate their calculus on the balance of risks. They want to delay a hike as long as possible but our forecast is that they will hike to 6.75 percent by the end of the second quarter.
'I think Indonesia will settle down into a pattern of steady growth of around 6 percent. I would expect the quarterly numbers are consistent with yearly growth by about 6 percent.'
JOANNA TAN, ECONOMIST, FORECAST PTE, SINGAPORE
'Political stability and a resilient domestic sector continued to help boost growth. In addition, Q4 saw stronger exports as the global economy recovers.
'Looking ahead, Indonesia's outlook for 2010 is positive though a few factors warrant attention: current political risks over the bailout investigation, external sector uncertainties and risks of exodus of funds on sharp risk aversion.
'Monetary policy may turn hawkish in Q1 this year given inflationary risks and the global monetary policy landscape.'
BACKGROUND:
- A Reuters poll of 12 analysts forecast the economy grew a median 4.97 pct from year ago versus third quarter's 4.2 pct expansion. The forecast range was between 4.4 pct and 5.98 pct.
- Analysts had expected the economy shrank by 3.0 percent on a quarter-to-quarter basis before seasonal adjustments, versus growth of 3.9 pct in Q3. The forecast range was minus 2.02 pct to minus 3.65 pct.
- The poll showed a median forecast of 4.4 pct growth in 2009 versus 6.1 pct in 2008, with a range of 4.3 pct to 4.69 pct.
- Growth was expected to have been broad-based as low interest rates boosted consumer spending and a recovery in the global economy strengthened demand for Indonesia's commodities such as palm oil and rubber.
* Indonesia's central bank held interest rates at 6.5 percent as expected last week, playing down economists' worries about a sharp acceleration in inflation, and signalled it was in no hurry to raise borrowing costs.
But some market watchers believe it will have to play catch-up and starting hiking rates by the end of June to curb inflationary pressures driven by the strong local and global economy.
(Reporting by Sunanda Creagh, Fitri Wulandari, Olivia Rondonuwu, Pip Freebairn, and Adriana Nina Kusuma; Writing by Gde Anugrah Arka; Editing by Sara Webb)
((ga.arka@thomsonreuters.com; Reuters Messaging: ga.arka.reuters.com@reuters.net; +62 21 384 6364 ext 911)) Keywords: INDONESIA ECONOMY/GROWTH (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
KEY POINTS:
* Q4 GDP growth at +5.4 pct y/y, above forecast at +4.97 pct
* Q4 GDP growth -2.4 pct q/q, better than forecast -3.0 pct
* GDP growth in 2009 at 4.5 pct, above forecast at 4.4 pct
For a graphic click on http://graphics.thomsonreuters.com/0210/ID_GDP0210.gif
MARKET REACTION:
- The rupiah was largely unchanged at 9,355 per dollar at 0420 GMT after the data announcement.
- The Indonesia Composite Index was largely unchanged, up just 0.06 percent on the day to 2,490.912 at 0424 GMT.
COMMENTARY:
DAVID SUMUAL, ECONOMIST, BCA
'This is more than expected, and I think this is due to a strong export growth in Q4. I think the hike in commodity price also helped.
'Usually the central bank is ahead of the curve, and looking from this stronger-than-expected growth, I think it will give an impact to the central bank rate, which will be raised mid-year.'
PRAKRITI SOFAT, ECONOMIST AT BARCLAYS CAPITAL, SINGAPORE:
'The Q4 figure is above market expectations. Bulk of the strength comes from consumption, but I do think investment spending has turned around the economy as it has been indicated in indicators such as motor vehicle sales, cement sales and so on.
'Going forward, economic momentum in Indonesia remains very robust, sentiment confidence is strong and also firms are becoming more positive towards investment plans.
'For 2010, we are looking for growth to come in at 6 percent.
'We expect Bank Indonesia to start hiking in Q2 by 25 basis point hike, 100 basis point total tightening through 2010.
'In Q1 2010, we should easily see growth 5.5-6 pct y/y. Seasonally adjusted Q4 number should be 1.5 pct q/q which is the same as Q3.'
SONG SENG WUN, ECONOMIST, CIMB-GK RESEARCH, SINGAPORE
'Last year we were all holding our breath, waiting to see what numbers we would end up with.
'In the case of Indonesia, resilient commodity prices also helped lift income in the rural areas plus we had soaring equities.
'Strong foreign interest and inflows all contributed in some part to the better-than-expected headline numbers.
'Interest rates still will depend on what fuel prices look like going forward. Oil prices are not going through the roof so that takes pressure off the government in terms of fuel subsidies and an initial source of inflation.
'We expect the benchmark BI rate to climb to 7.5 percent by the end of 2010 if inflation climbs to 6.3 percent.
'If commodity prices remain resilient it will still be supportive of growth. I think that in the best case scenario, if there is export recovery and no external shocks from oil, a 6 percent GDP forecast for 2010 is do-able.'
PURBAYA YUDHI SADEWA, ECONOMIST DANAREKSA RESEARCH INSTITUTE
'Our exports was the highest in history in December, and domestic consumption is higher than many have estimated, and the sales of cars and motorbikes have also gone on the rise.
'I am sure investment has started to grow and the economy has started to speed up. I think from the three engines of growth, many have underestimated them.'
DAVID COHEN, ECONOMIST, ACTION ECONOMICS, SINGAPORE
'Today's data is consistent with the sense the Indonesian economy is continuing its strong growth. The growth of 4.5 percent year-on-year is among the best performances around the world, and certainly in the G20 economies.
'The non-seasonally adjusted quarterly figure of -2.4 percent growth reflects a normal seasonal pattern for the fourth quarter. Based on our calculations, this would be around 1.5 percent growth seasonally adjusted.
'We think this continued growth in the economy will keep the markets happy. Like other economies in the region, Indonesia is now getting support from export demand, while domestic demand supported the economy last year.
'We see Bank Indonesia's forecasts of 5-5.5 percent GDP growth for 2010 as still perfectly reasonable.
'Today's data will have no immediate impact on interest rates. We continue to look for Bank Indonesia to begin to hike in the third quarter.'
TIM CONDON, ECONOMIST, ING FINANCIAL MARKETS, SINGAPORE
'We were looking for about 5.23 percent year-on-year growth for Q4. Our number was a little bit higher than consensus forecast but the number that came in was even better than our forecast. Better-than-expected growth is unambiguously positive.
'I think the crash of Q4 2008 is behind us, the government responded to that very quickly and that has enabled private consumption to hold up better than expected. It's a domestic demand story.
'Our thinking is that this allays concerns in Bank Indonesia about growth. Accelerating inflation will increasingly dominate their calculus on the balance of risks. They want to delay a hike as long as possible but our forecast is that they will hike to 6.75 percent by the end of the second quarter.
'I think Indonesia will settle down into a pattern of steady growth of around 6 percent. I would expect the quarterly numbers are consistent with yearly growth by about 6 percent.'
JOANNA TAN, ECONOMIST, FORECAST PTE, SINGAPORE
'Political stability and a resilient domestic sector continued to help boost growth. In addition, Q4 saw stronger exports as the global economy recovers.
'Looking ahead, Indonesia's outlook for 2010 is positive though a few factors warrant attention: current political risks over the bailout investigation, external sector uncertainties and risks of exodus of funds on sharp risk aversion.
'Monetary policy may turn hawkish in Q1 this year given inflationary risks and the global monetary policy landscape.'
BACKGROUND:
- A Reuters poll of 12 analysts forecast the economy grew a median 4.97 pct from year ago versus third quarter's 4.2 pct expansion. The forecast range was between 4.4 pct and 5.98 pct.
- Analysts had expected the economy shrank by 3.0 percent on a quarter-to-quarter basis before seasonal adjustments, versus growth of 3.9 pct in Q3. The forecast range was minus 2.02 pct to minus 3.65 pct.
- The poll showed a median forecast of 4.4 pct growth in 2009 versus 6.1 pct in 2008, with a range of 4.3 pct to 4.69 pct.
- Growth was expected to have been broad-based as low interest rates boosted consumer spending and a recovery in the global economy strengthened demand for Indonesia's commodities such as palm oil and rubber.
* Indonesia's central bank held interest rates at 6.5 percent as expected last week, playing down economists' worries about a sharp acceleration in inflation, and signalled it was in no hurry to raise borrowing costs.
But some market watchers believe it will have to play catch-up and starting hiking rates by the end of June to curb inflationary pressures driven by the strong local and global economy.
(Reporting by Sunanda Creagh, Fitri Wulandari, Olivia Rondonuwu, Pip Freebairn, and Adriana Nina Kusuma; Writing by Gde Anugrah Arka; Editing by Sara Webb)
((ga.arka@thomsonreuters.com; Reuters Messaging: ga.arka.reuters.com@reuters.net; +62 21 384 6364 ext 911)) Keywords: INDONESIA ECONOMY/GROWTH (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.