Indonesia's economic growth slower than forecast

Jakarta

INDONESIA'S economy expanded at a slower pace last quarter than economists had forecast, a setback for the government after eight interest rate cuts in the past two years.

Gross domestic product rose 5.06 per cent in the first quarter from a year earlier, the statistics bureau said in Jakarta on Monday. The median estimate of 23 economists surveyed by Bloomberg was for growth of 5.2 per cent. Compared with the previous quarter, GDP fell 0.42 pe cent; economists estimated a decline of 0.3 per cent.

Indonesia's central bank had been cutting rates since the beginning of 2016 in a bid to spur growth in Southeast Asia's biggest economy.

While consumer spending has been sluggish, growth was supported last year by a pick up in exports.

Financial markets have been roiled in recent weeks as higher US interest rates prompt outflows from emerging markets.

That has closed the door on further easing by Bank Indonesia and raised the prospect of the first rate hike since November 2014 as policy makers look to protect a currency trading near a two-year low.

Finance Minister Sri Mulyani Indrawati said last week that while the weakening currency presents risks for economic growth, the government would look to sustain economic momentum by extending assistance to low income groups.

The government is forecasting growth of 5.4 per cent this year. BLOOMBERG