Kedutaan Besar Republik Indonesia
Embassy of the Republic of Indonesia
Ambassade de la RÉpublique d'Indonésie

Indonesia’s Q2 GDP growth at 6.5 pct, in line with forecasts

Indonesia expanded at a robust 6.5 percent year-on-year in the second quarter of 2011, in line with expectations as the country saw strong exports and attracted hefty investment.

The pace of annual growth in Southeast Asia’s largest economy matched the previous quarter’s rise but stayed well below 6.9 percent in the last quarter of 2010, which was the fastest rise in at least six years.

At a time when the outlook for the global economy is getting increasingly cloudy, Indonesia is in a sound position. Despite the possibility GDP might grow at 6.8 percent this year, as the central bank has estimated, inflation is currently under check.

“The strong growth outcome validates expectations that the economy could outperform its regional peers this year, with strong support from domestic consumption and a firm external sector,” said Radhika Rao, economist with Forecast PTE in Singapore.

“This will also alleviate any nagging worries on Bank Indonesia’s mind,” she said, adding that the economy “will enjoy a ‘sweet spot’ of stable inflation and a sustained growth outlook.”

In July, inflation slowed to a 14-month low of 4.6 percent, and the central bank is widely expected to leave its benchmark overnight rate on hold at 6.75 percent — where it has been since early February — at a meeting on August 9.

Export growth reached 36 percent in the first half due to strong sales of commodities such as palm oil and rubber, and total exports may surpass a record $200 billion this year, said the country’s statistics bureau.

The country seems relatively insulated from the crisis in the Western world, going by the investment data, but a sustained crisis in either the U.S. or Europe could impact future prospects.

Total investment grew by 22 percent in the second quarter from a year earlier, with foreign direct investment rising 21 percent and on track for a record high, said the country’s investment board.