A woman holds rupiah banknotes in Jakarta. Indonesia’s economy grew at its slowest pace in four years in 2013, the statistics bureau said yesterday, as the end of a commodities boom undermined exports and higher interest rates dragged on consumption.


Reuters/Jakarta


Indonesia’s economic growth surprisingly gathered pace in the latest quarter, suggesting the economy is entering the new year with more momentum than expected to withstand the turmoil affecting emerging markets.
The upbeat report on gross domestic product marked the second time this week that Indonesian data has surprised to the upside, after statistics on Monday showed the country had posted an unexpectedly large December trade surplus.
The data could raise hopes the central bank’s aggressive tightening in 2013 has put Indonesia on course to fare better than other emerging markets grappling with sizable current account deficits and the risk of capital outflows, although uncertainty in emerging financial markets remains a risk.
“The worst is probably over, with signs of stabilisation apparent in inflation, current account balance and foreign reserve readings,” said Hak Bin Chua, an economist at BofA Merrill Lynch Global Research.
“A healthy balance sheet and low leverage is helping Indonesia weather Fed tapering and capital outflows,” Chua said in a report, adding that he expects Bank Indonesia to keep interest rates steady at its meeting on February 13.
GDP rose 5.72% in the October-December quarter from a year earlier, driven by firmer exports on a weaker rupiah and as private consumption stayed solid, the statistics bureau said yesterday.
The result beat the median forecast of 5.30% growth in a Reuters poll of economists and accelerated from a 5.62% expansion in the third quarter.
The rupiah and Indonesian stocks were little changed after the announcement. Private consumption rose 5.25% year-on-year after increasing 5.48% in the prior quarter.
The result showed that consumer demand  – which represents more than 50% of the economy –  has so far stayed resilient after the central bank raised its key rate by 175 basis points between June and November to defend the rupiah and cut the ballooning current account deficit.
The rupiah was Asia’s worst performing currency in 2013, falling more than 20% amid concerns over capital outflows on the US Federal Reserve’s planned stimulus reduction, but has held largely steady in 2014.
“We continue to expect domestic demand to moderate further into 2014, which will help stabilise the current account deficit,” said Daniel Wilson, an economist at ANZ Bank.
“However, with elections looming there will likely be a floor on consumption growth while more measured declines in investment can be expected through H1,” he said, referring to legislature and presidential elections to be held in April and July, respectively.
Bank Indonesia expects the current account deficit this year to be below 3% of GDP, compared with 3.8% in the third quarter of 2013, as a weaker rupiah helps boost exports. Exports jumped 7.4% in the fourth quarter from a year earlier, faster than a 5.26% rise in the previous three months, the GDP data showed.
Separate data released on Monday showed a monthly trade surplus of $1.52bn in December, the largest in two years, as exports surged 10% in the month from a year earlier – boding well for some narrowing of the current account deficit.
But some analysts see continued pressure on the current account this year, after the government on January 12 banned exports of unprocessed mineral ore and as demand for fuel imports stays strong, with recent data showing robust demand for cars and motorbikes.
“The risk is that mining companies have brought forward exports in anticipation of the ban ... (and) is likely to mean that export growth slows in the first quarter,” said Robert Prior-Wandesforde, an economist at Credit Suisse in Singapore.
Compared with the prior quarter, GDP fell 1.42% in October-December, versus economists’ expectations of a 1.67 contraction and against a 1.5% drop in the fourth quarter of 2012. Indonesia’s fourth-quarter GDP typically falls on a quarter-on-quarter basis in the fourth quarter.