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World bank positive about Indonesia’s economic outlook

World bank positive about Indonesia’s economic outlook

JAKARTA: Indonesia’s economic growth touched 5.2 percent year-on-year (y/y) in the fourth quarter of 2017, the highest growth in six quarters. Accelerating economic growth was driven by higher domestic demand, stronger investment, and rising private and government consumption. Albeit slowing, Indonesia’s export and import growth remained robust due to a sustained recovery in global trade and commodity prices.

Net exports, however, were a drag on growth in Q4-2017 as imports grew at a faster pace than exports, partly reflecting higher investment in machines and equipment. After significant destocking in Q3-2017, inventories accumulated in the next quarter, contributing positively to GDP growth. On the production side, manufacturing continued to contribute the most to growth among the nine production sectors, while construction and other services sectors saw the largest growth.

Headline consumer price inflation eased to an average of 3.5 percent (y/y) in Q4-2017 from 3.8 percent (y/y) in the preceding quarter, largely due to muted food price inflation, which reached the lowest quarterly average in 14 years. Core inflation in Q4-2017 remained unchanged from the 3 percent in the preceding quarter, the lowest quarterly average on record, reflecting stable inflationary pressures as the economy operates at near-full employment. In annual terms, headline inflation was 3.8 percent, higher than the 3.5 percent in 2016, predominantly due to increases in administered prices, notably the three electricity tariff hikes in the first half of 2017.