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Indonesia's long road to recovery from an economic downturn
that has persisted since last year appears to have ended, with the
country's economy having got back in first gear again during the second
quarter.
The economy grew by 5.2 percent in the three months ending June, as
compared to the same period last year, on higher government spending,
and stronger mining and agricultural exports, the Central Statistics
Agency (BPS) said Monday, signaling an end to a slowdown that has
lasted more than five quarters.
On a quarterly basis, economic growth was 2.2 percent higher than in
the first quarter, said BPS chief Rusman Heriawan during a media
conference.
The latest growth figures will restore confidence in the economy, which
grew 4.7 percent on-year during the first quarter, and 2.14 percent on
a quarterly basis during the first quarter.
Indonesia's economy has seen sluggish growth since 2004's final quarter
growth came in at of 6.6 percent. The trend was exacerbated by last
year's fuel price hikes, which pushed up inflation to 17 percent and
interest rates to 12.75 percent, delivering a severe blow to the
economy's main engine of growth: consumer spending.
Analysts and even government officials had expected little improvement
in growth during the second quarter, pinning their hopes instead on a
recovery in consumer spending and investment afterwards, especially
with inflation recently easing to some 15 percent and the central bank
having cut its rate to 11.75 percent.
Explaining further, Rusman said government spending and the country's
exports had been the prime movers of growth, expanding by 31.38 percent
and 11.3 percent, respectively, from the same period a year earlier.
Government spending and exports had grown 14.19 percent and 10.75
percent on-year in the first quarter.
Investment and consumer spending, on the other hand, continued to drag
the economy down. Investment shrank by 0.98 percent, while consumer
spending slowed to 2.99 percent. Imports grew by 8.3 percent.
Indonesia's exports in the first six months ending June had increased
by 15.14 percent to US$46.9 billion, riding on the back of higher
market prices for the country's main export commodities of crude palm
oil, rubber, coal and metals.
This increase in exports was also reflected in the BPS's growth figures
by sector, which recorded the country's mining and agriculture sectors
growing by 5.43 percent and 5 percent, respectively.
"It is rare that agricultural serves as a leading sector for growth,
which may signify that our economy is strengthening its resource-based
potentials," Rusman said.
Transportation and communications remained the leading sectors, with
13.29 percent growth, while the country's manufacturing industry
expanded only slightly by 3.05 percent.
Many sectors, notably the automotive industry, reported a decline in
production and sales on high inflation and interest rates.
Earlier in the day, Coordinating Minister for the Economy Boediono said
the government was still confident of achieving full-year growth of 5.8
percent -- the latest revision for 2006 growth agreed with recently by
the government and the House of Representatives.
The BPS report was released a day earlier than scheduled to allow time
for the presidential staff to include it in President Susilo Bambang
Yudhoyono's state of the nation address -- which includes an outline of
the 2007 budget -- to the House to mark Indonesian Independence Day on
Wednesday.
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