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GDP grows faster than expected in second quarter

Source
Jakarta Post - August 5, 2000

Jakarta – The Central Bureau of Statistics (BPS) announced here on Friday a higher than expected growth rate in the country's gross domestic product (GDP) in the second quarter but business analysts warned that the fragile condition in the political field could drag down the upward trend in the economy.

BPS deputy chairman Kusmadi Saleh said that the economy grew by 4.13 percent year in the second quarter, much higher than the market consensus of 3.5 percent. He said that the GDP grew at a meager level of 0.38 percent in the April-June period, much lower than the quarterly growth level of 2.36 percent in the previous quarter. "But if compared to the same period last year, the growth rate reached 4.13 percent," he added.

Kusmadi said that the quarterly growth rate was lower in the second quarter due to a seasonal decline in the agricultural sector. "But the overall performance is very encouraging and we are optimistic that the GDP growth will meet the official target of between 3 percent and 5 percent this year," he told a press briefing.

According to a BPS report, the GDP value, based on the current price, increased to Rp 609.2 trillion (US$71.6 billion) in the first half from Rp 560.8 trillion at the same period last year. Kusmadi said the major contributors to the GDP growth in the second quarter were the non-oil industries, utility sector and construction as well as services.

The construction sector grew by 13.07 percent in the second quarter over the same period last year, or 2.22 percent compared to the first quarter result. The transportation and communications sectors came second with year on year growth of 10.51 percent, although they showed only a paltry 0.93 percent growth in the quarter-on-quarter basis.

In the second quarter, the manufacturing sector's year-on-year growth stood at 5.73 percent, higher than the quarter-on-quarter record of 1.12 percent. Utility sector rose 6.79 percent year-on-year, slightly higher than the quarter-on-quarter record of 4.52 percent.

The agriculture sector is the only sector that recorded a negative growth on both year-on-year and quarter-on-quarter bases at minus 4.30 percent and minus 4.12 percent respectively. Kusmadi said the agriculture sector had always declined in the second, third and fourth quarters of any given year since harvesting season for most commodities took place between January and April.

On the demand sides, government spending rose 2.33 percent year-on-year, 6.12 percent for the quarter-on-quarter. He said the government had spent more money recently partly on its program to raise salaries for senior government officials and on the country's security program.

The actual household spending rose by 2.56 percent in the second quarter over the same period last year, better than the quarter-on-quarter result of only 0.40 percent.

Investment's year-on-year growth jumped by 21.14 percent, compared to the quarter on quarter increase of 3.31 percent. While exports jacked up by 24.08 percent year-on-year and 5.04 percent quarter-on-quarter.

Economists described the economic growth in the second quarter as being more healthy than in the previous quarter as it was driven by exports rather than by consumer spending as many previously feared. But they warned that the fragile condition on the political front could drag down the upward trend in the country's economic performance.

Head of research at PT Socgen-Crosby Securities Indonesia, Lin Che Wei said he was quite optimistic that the growth trend would be sustainable as long as the political situation would not get any worse than it already is. He said the second quarter result in particular was way beyond expectation. "Overall the result is quite satisfactory. It's well above our forecast. It is higher than the market's expectation." Lin said the second quarter growth of 0.38 percent was above his earlier forecast of 0.2 percent, while on a year on year basis the 4.13 percent result was well above his estimate of 3.6 percent. However, Lin said, the country should be aware that the current political instability might continue over the next couple of months and drag down economic activities.

Kusmadi said he was upbeat that the GDP growth in the third quarter would continue to show a positive trend, but refused to disclose a figure. He said economic activities had grown quite significantly in the second quarter of this year as indicated partly by the sharp year-on-year growth of investment and exports.

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