Indonesia: GDP growth steady in Q4, 2014 result weakest in five years
February 17, 2015
In the fourth quarter of 2014, GDP grew 5.0% over the same quarter of the previous year. The expansion matched the increase observed in the third quarter. GDP growth rates have been losing momentum almost uninterruptedly since Q4 2010. The result slightly beat market expectations of a 4.9% rise. The Q4 reading reflects that steady private consumption and fixed investment growth were offset by reduced government spending and a weaker external sector. In the full year 2014, the economy increased 5.0%, which was below the 5.7% growth tallied in 2013 and marked the weakest growth in five years. These results put additional pressure on President Joko Widodo as he seeks to revitalize the economy.
On the domestic side of the economy, total consumption increased 4.7% in Q4 (Q3: +5.3% year-on-year). Private consumption growth moderated slightly from a 5.4% increase in Q3 to a 5.3% rise in Q4, although government consumption dropped from a 4.5% expansion in Q3 to a 1.4% increase in Q4. Meanwhile, fixed investment growth ticked up from 3.5% to 3.9%.
The external sector continued to suffer the effects of a slowdown in global demand, particularly from China, as well as the mineral export ban that the government introduced in an attempt to promote the development of a domestic processing industry. Exports contracted 2.9% in Q4, which followed the 0.7% drop registered in Q3 and marked the fourth consecutive decline. Imports registered a 0.1% increase in Q4 (Q3: -3.7% yoy). As a result, the external sector’s net contribution to overall growth swung from plus 1.4 percentage points in the third quarter to minus 1.1 percentage points in the fourth.
Author: Carl Kelly, Economist