JAKARTA- An historic rise in commodity prices and relaxation of COVID-19 curbs helped Indonesia’s economy grow for a fourth straight quarter between January and March, official data showed on Monday.
Southeast Asia’s largest economy grew 5.01 percent in January-March from the same period last year, compared with 5.02 percent growth in October-December. A median forecast by 19 analysts polled by Reuters had expected 5.00 percent growth in the first quarter.
Growth in the January-March period was supported by recovery in consumption, investment and exports. Surging prices of global commodities such as coal, palm oil and nickel, also contributed to record high trade surpluses for Indonesia, a major supplier of these resources.
COVID-19 restrictions imposed earlier in the year, which have now been lifted, led to a strong pick-up in Indonesia’s economic activities, Margo Yuwono, head of Indonesia’s statistics bureau, told a news conference.
“Household consumption has improved, even for tertiary spending such as travels,” he added.
But President Joko Widodo has warned of inflation risks stemming from rising global fuel and food prices and supply chain disruptions made worse by the war in Ukraine.
Analysts also cited geopolitical concerns as factors that could hamper growth.
“Several global risks that will affect the national economic recovery include geopolitical risks, China’s economic slowdown and rising global inflation that has prompted tightening of global monetary policy,” JosuaPardede, an economist at Bank Permata, said.
Indonesia’s central bank last month lowered its economic growth outlook for the year to 4.5 percent-5.3 percent, from 4.7 percent-5.5 percent previously, citing slower global growth and disruptions to trade.
Bank Indonesia (BI), which has pledged to keep interest rates at record lows until it sees signs of pressure on core inflation, intends to review its monetary policy normalization plan in May to June, and assess any risks to the inflation outlook if the government changes energy prices and subsidies.
Indonesia’s central bank may hike its reserve requirement ratio (RRR) further if inflation starts to pick up, while the option to raise interest rates will be its last resort, its senior deputy governor said in a seminar on Friday.
Bank Indonesia (BI) has already started normalising some of its pandemic-era ultra loose monetary policy by announcing three hikes in the RRR by 300 basis points between March to September.
“If necessary, if we’re looking at liquidity still ample and inflation starts picking up, we may use further increases on the reserve requirement ratio,” Destry Damayanti said, adding that BI will be careful so that its monetary tightening measure does not hurt the ability of banks to lend.
Her comments came as inflation expectations build in Southeast Asia’s largest economy, despite the March inflation rate of 2.64 percent remaining within BI’s target band of 2 percent to 4 percent.
On a quarterly, non-seasonally adjusted basis, the economy contracted 0.96 percent, compared with 1.06 percent growth in October-December and forecasts of a 0.89 percent decline.
