Friday, December 3

Indonesia GDP growth slows more than expected in Q3 due to COVID-19 wave

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JAKARTA — Indonesia’s economic growth slowed more than expected in the third quarter as restrictions to control a deadly wave of COVID-19 weighed on activity, although recent data suggests growth may be getting back on track in the current quarter.

Southeast Asia’s largest economy grew 3.51% in the July-September quarter from the same period last year, below the previous quarter’s 7.07% expansion, Statistics Indonesia data showed.

Analysts polled by Reuters had expected growth to slow to 3.76%, while government officials had predicted 4.5%.

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The main stock index gave up some gains after the data to trade up 0.02%, falling from 0.3% at the open, while the rupiah weakened.

Authorities in Indonesia imposed strict mobility restrictions in July to August in response to a spike in COVID-19 infections.

The virus containment measures hit household consumption, which slowed to 1% in the third quarter from 6% in the previous three months. Private consumption accounts for more than half of the country’s gross domestic product.

Investment growth also slowed, while export and import growth eased slightly but remained high.

More recent data has shown the economic recovery has regained momentum after restrictions were gradually lifted in late August, with the manufacturing purchasing managers’ index (PMI) at an all-time high last month as business disruptions eased and the country’s vaccination rollout ramped up.

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However, Finance Minister Sri Mulyani Indrawati has warned that rising global inflation, China’s economic slowdown and the prospect of tightening monetary in the United States and the European Union could affect Indonesia’s growth outlook.

Sri Mulyani expects full-year GDP growth of 4%, while the central bank’s forecast is 3.5% to 4.3%. Indonesia’s economy shrank 2.07% last year, the first contraction since 1998, due to the impact of the pandemic.

Bank Indonesia has pledged to keep its “pro-growth” stance this year, but Governor Perry Warjiyo has said the bank will begin to reduce the size of excess liquidity in the banking system next year and consider a rate hike at end-2022. ( Reporting by Gayatri Suroyo and Fransiska Nangoy; editing by Richard Pullin)