Jakarta – Indonesia's annual economic growth in the fourth quarter is expected to slow from the third quarter, as a plunge in global demand for commodities starts to bite, a deputy central bank governor said on Wednesday.
Southeast Asia's top economy grew 6.3 percent last year, the fastest pace in a decade, partly due to robust exports of commodities such as palm oil, nickel and coal. But Indonesia's annual economic growth eased in the third quarter to 6.11 percent, the weakest pace in more than a year, reflecting a slide in prices of commodities.
"I see in 2008 we may still grow around 6 percent, while in the fourth quarter the economy may grow around 5.5-5.6 percent," deputy central bank governor Hartadi Sarwono said.
Bank Indonesia cut its key interest rate for the first time in a year on Dec. 4 to help protect the economy in the face of a severe global downturn. Analysts now see further rate cuts in a bid to help sustain growth in the world's fourth most populous country.
Analysts see a need to maintain growth of over 6 percent in order to create new jobs in the sprawling, developing nation.
Sarwono added that economic growth in 2009 would hinge on conditions in the United States, but Bank Indonesia expected growth of around 5 percent. "It depends on economic improvements in the US for growth to reach 5.5 percent."
The World Bank said in its semi-annual report on Wednesday that East Asia would experience a less severe slowdown than Europe, Central Asia or Latin America, which are similarly exposed to international trade and finance. The report estimated Indonesia would grow 6.0 percent in 2008 and 4.4 percent in 2009.
The World Bank advised governments to use direct spending, particularly on ongoing infrastructure projects, to stimulate demand.
Finance Minister Sri Mulyani Indrawati forecast on Dec. 2 GDP growth for 2008 would come in at 6.2 percent, slightly below an earlier forecast of 6.4 percent. She estimated the economy would expand between 4.5-6.0 percent in 2009.
[Reporting by Adriana Nina Kusuma; Writing by Tyagita Silka; Editing by Ed Davies.]