By Pranoy Krishna
BENGALURU (Reuters) – Indonesia’s economic growth likely slowed modestly in the first quarter of the year as private consumption softened and weaker demand from China reduced exports, according to a Reuters poll of economists.
Southeast Asia’s largest economy continues to see sluggish household spending, even after Bank Indonesia cut interest rates by a total of 50 basis points in its current easing cycle – including a surprise 25-basis-point reduction in January to boost growth.
The economy likely grew 4.91% in the January–March quarter from a year earlier, slightly below the 5.02% expansion recorded in the fourth quarter of last year, according to the median forecast in an April 25–May 2 poll of 22 economists.
Forecasts for the data, scheduled to be released on May 5, ranged from 4.70% to 5.10%.
“We expect private consumption growth to slow but still account for half of the first quarter’s headline growth rate. Exports will make a smaller contribution than previously, as Indonesia’s major trading partner, China, is grappling with a weak economy and rising geopolitical tensions,” said Jeemin Bang, associate economist at Moody’s.
On a quarter-on-quarter basis, the economy likely contracted by 0.89% in the January–March period, down from a 0.53% expansion in the fourth quarter, as heightened uncertainties around trade and low government spending in the quarter began to take a toll on economic activity, the poll showed.
A slowdown in demand from China, the country’s largest trading partner, caused exports to moderate to a nine-month low of 3.16% in March, while consumer confidence sank to a five-month low.
“Consumers’ current income perceptions and expectations slightly dipped … consumption held but with signs of softening, particularly among the middle class, whose size and confidence are declining,” said Josua Pardede, chief economist at Permata Bank.
The economy was forecast to grow around 4.8% this year, according to a separate Reuters survey, well short of the 5.2% growth expected by the government.
(Reporting by Pranoy Krishna, Polling by Susobhan Sarkar and Veronica Khongwir; Editing by Kim Coghill)
