Aditya Suharmoko, Jakarta – The pace of Indonesia's economic growth will likely pick up in the last quarter of the year on strengthening consumption while predicted signs of global economic recovery start bolstering export demand, according to economists.
The higher growth in the last three-month period would compensate for lower growth in the second and third quarters, compared to quiarter one, resulting in an overall full-year economic growth of between 3 and 4 percent.
"The economy will decline in the second quarter (of 2009), slope (gently down) in the third quarter and start to pick up in the fourth quarter of the year," Bank Mandiri chief economist Mirza Adityaswara told a press conference on Tuesday.
The central bank estimated the economy expanded 4.6 percent in the first quarter this year, expecting a full-year growth of between 3 percent and 4 percent. The Central Statistics Agency (BPS) will officially announce the first-quarter economy results in May.
Mirza said there were already signs of confidence in the economy last month, as seen from the increasing sales of cement, motorcycles and housing. But the impact of declining overall industrial production will affect the economy in the second and third quarters.
He estimated nonetheless that the economy will grow at 4 percent this year, with the manufacturing sector growing by 2 percent, or only about half of the 3.7 percent growth posted for the sector in 2008.
M. Chatib Basri, an economist at the University of Indonesia (UI), shared the same forecast, saying that overall consumption – the largest contributor to Indonesia's economy – would decrease in the second and third quarters of 2009 due to the impact of declining industrial production but with a very good chance of picking up in the last quarter.
"However, whether the economy can pick up in the fourth quarter will still also depend on global growth. I hope it can," he said, expecting the country's economy to expand overall between 3 percent and 4 percent.
In the first quarter, consumption remained strong, resulting in economic growth of 4.5 percent, said Chatib, who is also an advisor to the Finance Ministry.
The government's stimulus in the form of tax cuts has helped people to spend more on consumption, particularly as Indonesians are less exposed to credit. There are more young people than old people that shop more often and poor people are tending to spend money as soons as they get it, Chatib said.
The economy will depend more heavily on government spending this year as private consumption slows down, while exports and investment are predicted to contract, compared to last year.
According to BPS, exports contracted by 32.9 percent in February. The Trade Ministry said exports might contract by up to 30 percent overall during 2009.
But a low inflation rate will help spur demand and provide the central bank more headroom to cut its benchmark interest rate to spur growth. According to BPS, inflation slowed to 7.9 percent by March.
Mandiri Sekuritas chief economist Destry Damayanti said that as inflation would likely continue to slow, BI could "more aggressively cut its rate".