The economy expanded 5.6 percent last year, higher than 2004, with increased government spending compensating for sagging private consumption and investment hit by the rise in inflation and interest rates, the Central Statistics Agency (BPS) says.

Grimmer prospects may lie ahead, however, as BPS data released Wednesday showed quarterly growth continued on a downward trend for the fifth consecutive quarter.

The agency said Indonesia's gross domestic product (GDP) contracted 2.18 percent during 2005's fourth quarter from the previous quarter, but grew 4.9 percent from the same period in 2004.

The declining trend in quarterly growth started in the fourth quarter of 2004, when the economy grew 6.65 percent. Growth slowed down to 6.25 percent in the first quarter in 2005, and 5.63 percent in the second and third quarters.

The economy expanded by a revised 5.05 percent in 2004. It suffered a 13.2 percent contraction in 1998 following the crisis, resulting in surging unemployment and poverty, before returning to the black with 0.23 percent growth in 1999, and steadily improving afterwards.

Agency chief Choiril Maksum said the quarterly growth decline was mainly due to a postharvest production drop in the agriculture sector, while the full-year growth was affected by such external factors as surging oil prices and a global trade slowdown. Domestic factors at play included last year's fuel price hike and rising interest rates.

Last year was tumultuous for the economy, with soaring oil prices battering the rupiah and jeopardizing fiscal stability, with the government forced to hike fuel prices in March and October.

It pushed up inflation, compelling Bank Indonesia to increase its benchmark interest rate from 8.5 percent to 12.75 percent last July to help support the rupiah and contain inflation.

The devastating combination of inflation and high interest rates blindsided the country's consumption-driven economy.

Although private consumption remained the economy's backbone, still making up of 65 percent of GDP, its growth last year slowed down to only 3.95 percent from 4.94 percent in 2004.

Investments also took a blow, with its growth and contribution dropping to 9.93 percent and 21.97 percent respectively, from 15.71 percent and 20.44 percent in 2004. Import growth declined to 12.35 percent from 24.95, while exports inched up to 8.47 percent from 8.6 percent.

Increased government spending helped make up the slack, surging to 8.06 percent from 1.95 percent.

In response to the figures, Finance Minister Sri Mulyani Indrawati said last year's fourth quarter growth was relatively satisfying compared to other countries.

She said a slowdown in private investment during the first quarter of the year could be compensated by the higher-than-expected growth in consumption.

The government is expecting growth of 6.2 percent for this year, with the central bank forecasting from 5.0 to 5.7 percent.

Citibank chief economist Anton Gunawan said growth may remain slow in the first quarter, and only begin picking up by the second half of the year.