August 2, 2019 / 4:59 AM / a month ago

Indonesia second-quarter GDP growth likely close to years-long pace around 5%: Reuters poll

JAKARTA (Reuters) - Indonesia’s second-quarter economic growth likely almost matched that of the previous three months, as soft commodity prices and weakening global trade continued to hurt exports, a Reuters poll showed on Friday.

FILE PHOTO: A general view shows the business district during the dusk in Jakarta, Indonesia, May 2, 2019. REUTERS/Willy Kurniawan/File Photo

The resource-rich country has been trying to lift GDP growth significantly, but despite heavy infrastructure investment by the government, the pace has remained about 5% for years.

The median forecast from 16 economists in a Reuters poll was for Southeast Asia’s largest economy to have expanded 5.05% in April-June from a year earlier, compared with the 5.07% in the first quarter.

Household consumption, which accounts for more than half of GDP, likely remained stable, helping the headline growth rate stay above 5% while exports were weak, said Andry Asmoro, Bank Mandiri’s chief economist.

“Export growth continued to face some hurdles in Q2, including weakening global demand and lower commodity prices,” said Asmoro, who predicted 5.06% GDP growth.

Finance Minister Sri Mulyani Indrawati on July 16 predicted 5.1%, reflecting weaker government spending, but an expected pick-up in investment.

TAX CHANGES

Indrawati has announced tax incentives for some industries and pledged to push ahead lower corporate tax rates to boost investment and accelerate economic growth.

“Our domestic factors are contributing something positive for the GDP growth momentum and the global condition can also contribute a positive nuance,” Indrawati said on Thursday.

The central bank has also jacked up efforts to increase economic growth momentum by cutting the benchmark interest rate and bank reserve requirements last month, though Governor Perry Warjiyo has said the impact on growth will be felt more in 2020.

President Joko Widodo, who won re-election in April, has promised to be even more business-friendly in his second five-year term, pledging to cut corporate tax rates, revise rigid labor laws and increase investment in infrastructure and education.

Indonesia could lift its GDP growth to an annual average of 5.4%-6% during Widodo’s 2019-2024 term, according to a proposal from the planning ministry.

The International Monetary Fund, which predicts a 5.2% rate for 2019, sees a 5.3% medium-term growth rate in Indonesia.

Reporting by Tabita Diela, Nilufar Rizki and Maikel Jefriando; Writing by Gayatri Suroyo; Editing by Richard Borsuk

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