Indonesias economy expands by 6.5% in Q3

Updated: 2011-11-07 16:11

(Xinhua)

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Indonesias economy expands by 6.5% in Q3

Motorists travel under the ongoing construction of a flyover in Jakarta November 7, 2011. [Photo/Agencies]

JAKARTA - Indonesia's economy at the three months ending in September grew steadily for a three straight quarter by 6.5 percent year on year, as domestic economic activities picked up, the Statistic Bureau announced here on Monday.

Indonesia saw fasting month in August, followed by the Islamic festivity in September that had spurred spending on the sectors of transport and communication, trade, and other services, Slamet Sutomo, deputy for statistic analysis balance of the bureau said.

"The growth at the third quarter, year on year, has been supported most by the growth (at the sectors of) trade, hotel and restaurant, transport and communication, and other services," he told a press conference at the bureau.

Trade, hotel and restaurant grew by 10.1 percent in the quarter year on year, air transport and land transport which grew by 13.68 percent and 7.08 percent respectively, communication by 11.01 percent, and other services by 7.8 percent, said Sutomo.

Household consumption at the country with over 240 million population contributed 2.7 percent to the growth in the third quarter, he said.

Nevertheless the gloomy global economy had impact on the growth of exports to 8.3 percent and imports of 5 percent, said Sutomo.

Chief economist of Bank Danamon, Anton Gunawan said that the debt crisis in the United States had significantly decreased Indonesia's export of manufacture products but insignificantly trimmed most of Indonesia's other exports comprising basic needs of mine resources products and plantation products.

"The most important thing is that the government should prepare in face of the risks of the global crisis next year as we still do not know the trend of the crisis in the United States and Europe in the future," he told Xinhua by phone on Monday.

As a small chance to get more revenue from taxes, a financial stimulus was badly needed to spur economic growth next years which meant that there would be more deficit, said Gunawan.

The government has set a target of 1.5 percent of budget deficit next year.

The government has upgraded funds to be used for anticipating the crisis to 15.8 trillion rupiah (some $1.776 billion) in the next years's budget from 4.7 trillion rupiah (about $528.386 million) in this's year budget, Finance Minister Aagus Martowardojo has said.

Indonesian central bank cuts its benchmark interest rate by 25 basis points to 6.5 percent in September, the first in more than two years, to spur economic growth. It may make another rate cut on its upcoming meeting at the beginning of this month, as inflation pressure has been weakened, the Central Bank governor Darmin Nasution has said recently.

Indonesian annual inflation rate accelerated at slower pace in October to 4.42 percent year on year after accelerating at 4.61 percent in September as gold and foods prices decreased, the bureau has said.

Indonesian central bank has forecast the economy to accelerate by 6.7 percent in the fourth quarter supported by investment growth and household consumption, as the foreign capital inflows have come again in the country with sound-macro economic fundamentals, accelerating growth, high interest rate of 6.5 percent, relatively stable political condition, emerging middle classes and growing wealth amid the expectation to jump into investment grade.

For the entire year, the bank has predicted the economy would expand by 6.6 percent, and at 6.2 to 6.7 percent next year.