Indonesia’s economic growth surprisingly picked up in the second quarter of this year, signalling that Southeast Asia remains resilient to the global slowdown.
Indonesia’s statistics bureau said gross domestic product growth last quarter was 6.4 percent from a year earlier against 6.3 percent in the first quarter, helped by domestic consumption and investment. GDP grew by 2.8 percent on a quarterly basis, although the figures are not seasonally adjusted.
Economists had forecast that annual growth in Southeast Asia’s largest economy would ease to 6.1 percent, citing shrinking exports.
But buoyant domestic demand has kept growth on an even keel.
Thailand and Malaysia are also expected to post a pick up in growth in the second quarter versus the first quarter, economists have said.
Investors are pouring into Southeast Asian stock markets, with bourses in Manila, Ho Chi Minh, Bangkok and Singapore all seeing double-digit rises this year. Investors are betting on long-term growth — IHS Global Insight forecasts the region’s GDP will overtake Japan by 2028.
As demand from China and Europe fell in recent months, Indonesia has had consecutive trade deficits between April and June, putting pressure on the rupiah. The currency, which has fallen 4.4 percent against the dollar this year, is the second-worst performer among emerging Asian currencies.
A burgeoning appetite for imports, from wheat for fast food to iPads and luxury cars, in a country that mostly exports raw commodities such as coal and crude palm oil, created a $1.3 billion trade deficit in June — a deficit that economists see continuing to the end of the year.
The GDP data suggests the central bank will not be under any pressure to cut interest rates, which many had feared might be necessary if the economy showed signs of easing.
Along with the weak rupiah, inflation picked up last month because of higher food prices ahead of the Muslim Ramadan period, economists say.
Bank Indonesia, which holds its next policy meeting on Thursday, has left interest rates at a record low 5.75 percent for five months after slashing rates by 100 basis points between October and February to prop up the domestic economy.
In recent months, most analysts have expected the central bank to stay on hold all year.