Update: Indonesia's GDP grows more slowly than expected in Q1

[JAKARTA] Indonesia's economy grew 4.92 per cent from a year earlier in the first quarter, a slower pace than expected, the statistics bureau said on Wednesday.

The median forecast of a Reuters poll was for an annual pace of 5.05 per cent in January-March. Annual growth in the last quarter of 2015 was 5.04 per cent.

Investment growth was weaker than the December quarter.

The head of statistics bureau Suryamin said it is usual that economic activity slows in the start of a year.

"Our start in 2016 is better than the start of 2015," said Suryamin. "Economic activity almost always slows in the first quarter, especially after growing higher in the fourth quarter."

On a quarterly, non-seasonally adjusted basis, gross domestic product (GDP) contracted 0.34 per cent in the first quarter.

Growth in Indonesia weakened in 2015, to 4.8 per cent, as poor commodity prices, contracting exports, weak investment and waning consumption produced the lowest growth rate since 2009.

In each year since 2011, economic growth has slowed - a trend that the government hopes to end this year.

A cabinet reshuffle in August and a state focus on lifting growth generated some momentum and the economy started to rebound in late 2015, albeit at a moderate pace. "While the government is doing what it can to support growth, the gravitational pull of a cyclical downturn is much stronger," said Trinh Nguyen, senior economist for emerging Asia at Natixis.

Realising Indonesia cannot rely on the resource sector for growth any more, President Joko Widodo has worked to expand the country's weak manufacturing sector.

The Finance Ministry has offered many tax incentives and promised a cut in corporate income taxes.

The central bank has cuts its key benchmark rate three times in the first quarter, by a total of 75 basis points.

Also, Bank Indonesia has announced it will use a new benchmark in August, an effort to become more effective in getting banks to lower lending rates.

Mr Jokowi has pledged to get growth up to 7 per cent a year in 2019, the last year of his term.

The government's target for growth this year is 5.3 per cent, while the central bank's outlook is 5.2-5.6 per cent.

On Wednesday, the statistics bureau said the unemployment rate was 5.50 per cent in February, from August's 6.18 per cent.

REUTERS