Statistics Indonesia (BPS) announced on Monday (05/05) that the economy of Indonesia - Southeast Asia's largest economy - grew at a much slower pace in the first quarter of 2014 than had been expected by analysts. Gross domestic product growth slowed to 5.21 percent (year-on-year) in Q1-2014, significantly down from the 6.03 percentage growth (yoy) that was recorded in Q1-2013. Gross domestic fixed capital formation (GFCF) slowed to 5.13 percent from 5.9 percent in the same period last year.
Previously, various forecasts suggested that the Indonesian economy would grow about 5.60 to 5.75 percent in Q1-2014. As such, the 5.21 percent growth result was shocking, despite the fact that a continuation of the economic slowdown had been expected. On a quarterly basis, the economy expanded 0.95 percent.
Indonesia's Quarterly GDP Growth 2009–2014 (annual % change):
|Year|| Quarter I
||Quarter II||Quarter III||Quarter IV|
Source: Statistics Indonesia (BPS)
Gross Domestic Product of Indonesia 2006-2013:
(in billion USD)
(annual percent change)
|GDP per Capita
Sources: World Bank, International Monetary Fund (IMF) and Statistics Indonesia (BPS)
Main reasons that explain slowing growth of the Indonesian economy in the first quarter of 2014 are weakening investments and exports. Indonesian exports of goods and services contracted by 0.78 percent after slowing in the same period of the previous year by 3.39 percent. Head of BPS Suryamin said that the contraction was the result of the implementation of the ban on exports of unprocessed minerals (implemented on 12 January 2014). Although the ban is considered having a positive impact on the country's trade balance for the long-term (as it leads to value-added exports), it limits the value of exports on the short-term due to the current lack of smelting facilities in Indonesia. Meanwhile, imports into Indonesia also declined, particularly due to a decrease in imports of capital goods (amid the economic slowdown).
In contrast, household consumption - accounting for about 56 percent of total economic growth in Indonesia - continued to grow in the first quarter of 2014, driven by the April legislative election. Apart from food products, consumption of non-food products (t-shirts and screen printing) also increased. Household consumption grew from 5.17 percent in Q1-2013 to 5.61 percent in Q1-2014.
Government consumption accelerated to 3.58 percent (yoy) as the government initiated various infrastructure projects, such as roads and bridges, as well as higher distribution of raskin (subsidized rice for the poor).