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Indonesia grows at best pace in 4 years, but consumption still weak

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Indonesia's economy grew at its fastest pace in four years in October-December, but sluggish consumption continues to keep the growth rate from moving much above 5.0 per cent, where it has been for years.

[JAKARTA] Indonesia's economy grew at its fastest pace in four years in October-December, but sluggish consumption continues to keep the growth rate from moving much above 5.0 per cent, where it has been for years.

In the fourth quarter, gross domestic product rose 5.19 per cent from a year earlier, the highest since 2013's last period, while full-year growth was 5.07 per cent, making 2017 the best year since 2013.

Consumption, the biggest contributor to Indonesia's economy, picked up pace in the fourth quarter from the previous one, but remained slightly below 5 per cent on annual basis, the bureau's data showed.

Capital Economics said it sees "little prospect of a sustained recovery".

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Despite interest rates, credit growth remains very weak, it said, adding that it expects economic growth of 5 per cent both this year and in 2019.

The government of President Joko Widodo, whose five-year term ends in 2019, has rolled out a series of deregulation moves in a bid to attract more investment and cut reliance on consumption as a growth engine.

In the fourth quarter, investment grew by 7.27 per cent according to the statistics bureau, picking up pace from 7.11 per cent in the third quarter.

Despite deregulation moves, red tape remains a big hurdle and source of complaint among investors.

Frequent and abrupt changes in regulations are discouraging foreign investors from putting money into Southeast Asia's biggest economy, according to the head of the investment board.

On trade, Indonesia posted a surplus nearly every month in 2017, and price improvements in energy-related commodities and palm oil boosted commodity exports.

Exports grew by 9.09 per cent in 2017, while imports rose 8.06 per cent, the statistics bureau said.

Government spending increased in the fourth quarter and grew by 2.14 per cent for the full year.

REUTERS

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