Indonesia’s economy grew at the fastest pace in more than a year last quarter as record-low interest rates boosted consumer spending and exports and investment recovered.
Gross domestic product in Southeast Asia’s largest economy increased 5.7 percent in the three months to March 31 from a year earlier after gaining 5.4 percent in the previous quarter, the Central Statistics Office said today in Jakarta. The median estimate of 20 economists in a Bloomberg News survey was for a 5.79 percent expansion.
Bank Indonesia has left its benchmark interest rate at 6.5 percent since August and urged lenders to expand credit as President Susilo Bambang Yudhoyono focuses on boosting growth after winning a second term last July. That’s lifted earnings at companies including PT Bank Rakyat Indonesia and PT Bank Manadiri, the nation’s largest lender by assets.
“Domestic demand has continued to strengthen in Indonesia, evidenced by the strong data seen in recent months like improving loan growth, robust vehicle sales and strong imports growth,” Gundy Cahyadi, an economist at OCBC Bank in Singapore, said ahead of today’s report. “Faster loan growth suggests private investment is also much better now and supportive of the outlook going forward.”
Loans for motorbikes increased to 146,000 units in the first quarter of this year from 80,000 a year ago, said Suwandi Wiratno, president director of PT Wahana Ottomitra Multiartha, the motorcycle financing unit of PT Bank Internasional Indonesia. Sales are expected to rise to 600,000 units this year, or 6.6 trillion rupiah ($724 million), from 389,000 units or 4.3 trillion rupiah last year, he said.
“Consumption is still the main driver of growth,” Wiratno said. “Car and motorcycle sales are on the rise. The economy is moving, which means more job opportunities.”
The Jakarta benchmark stock index has increased 8.1 percent this year and the rupiah gained 14 percent in the past 12 months to become the best performer in Asia, as foreign funds sought to take advantage of Indonesia’s strengthening economy and political stability.
Foreign holdings of Indonesian bonds rose to 148 trillion rupiah as of the end of April from 108 trillion rupiah at the end of December 2009.
Growth in Asian economies from Malaysia to China is accelerating as the global recovery boosts demand for the region’s semiconductors, palm oil and televisions, after governments around the world boosted public spending and slashed interest rates to increase consumption.
Indonesia’s exports, which account for 29 percent of gross domestic product, surged 54 percent to $35.4 billion in the first quarter from $23.03 billion a year earlier, according to data from the statistics bureau.
“We have seen signs of recovery in investment and exports especially from China, said David E. Sumual, an economist at PT Bank Central Asia.
Domestic and foreign investment totalled 42.1 trillion rupiah ($4.6 billion) in the first quarter, according to data from the Board of Capital Investment. Foreign direct investment accounted for 35.4 trillion rupiah.
Economic growth has also been supported by rising confidence, buoyed by the most stable political climate since the ouster of the dictator, Suharto, in 1998. A central bank index measuring consumer sentiment rose to 107.4 in March from 98.6 a year earlier, bolstering demand for mobile phones and automobiles.
Car sales in Indonesia rose 74 percent to 174,042 units in the first three months of this year from a year earlier, according to the Association of Indonesian Automotive Industry. Cement consumption rose to 10.3 million tonnes in the first quarter from 8.98 million tonnes a year earlier, data from an industry group shows.
“A more and more positive story is coming from Indonesia,” said Rudyanto Somawihardja, president director of PT Sinar Mitra Sepadan Finance, a financing company in Jakarta. “Car sales are rising, cement sales are picking up, signaling an increase in purchasing power.”
Sinar Mitra expects revenue to double to 3.7 trillion rupiah this year from 1.7 trillion rupiah in 2009, Somawihardja said last week.
Yudhoyono, 60, has pledged to double spending on roads, seaports and airports to $140 billion over the next five years to help deliver average growth of 6.6 percent over the remainder of his term ending in 2014.
“With ample liquidity now, banks are more than willing to finance infrastructure projects such seaports and toll roads,” said David E. Sumual, an economist at PT Bank Central Asia in Jakarta.
Indonesia’s economy grew 1.9 percent in the first quarter from the previous three months, after a contraction of 2.4 percent in the October-to-December period. That compared a median forecast of 13 economists in a Bloomberg News survey was for a 2.02 percent expansion.