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Indonesia Q2 Growth Slowest Since 2009

Indonesia’s economy expanded at the slowest rate since 2009 on weak demand, posing a severe challenge to president-elect Joko Widodo, who is set to take charge later this year.

Gross domestic product, or GDP, increased 5.12 percent year-over-year in the second quarter following the 5.22 percent increase in the previous quarter, Statistics Indonesia said Tuesday. Economists had expected a 5.20 percent growth.

“Looking ahead, while sentiment has certainly improved following last month’s presidential election, we believe growth is likely to remain subdued for a while yet,” Capital Economics Asia Economist Gareth Leather said.

“Some of the factors that have contributed to the slowdown will continue to weigh on growth, regardless of the actions of the new president.”

Household consumption growth eased slightly to 5.59 percent in the second quarter from 5.61 percent in the first three months of the year. Government consumption declined 0.71 percent in the second quarter, after increasing 3.58 percent in the previous quarter.

Gross fixed capital formation growth also slowed to 4.53 percent from 5.14 percent. Exports fell at a faster rate of 1.04 percent compared to 0.44 percent in the previous quarter. Imports shrunk 5.02 percent after a 0.73 percent fall in the previous three months.

Weaker investment and construction growth in China will continue to act as a drag on commodity prices, which in turn will hold back both export revenue and investment, Capital Economics’ Leather said.

On the production side, almost all the industries recorded increases in output, though at a slower rate than in the first quarter. Manufacturing grew 5.04 percent, after a 5.13 percent expansion in the previous three months.

Farm output rose 3.39 percent versus 3.22 percent gain in the previous quarter. Services output growth rose to 5.68 percent from 5.71 percent.

On a quarter-over-quarter basis, GDP grew 2.47 percent, which was faster than the 0.97 percent rise in the first quarter.

The Indonesian economy grew 5.17 year-over-year in the January to June period.

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