JAKARTA—Indonesia’s efforts to reboot its economy were dealt a blow Monday as official data showed growth ticking up in 2016 but undershooting expectations for the final quarter.
President Joko Widodo came to power in 2014 on a pledge to boost economic expansion to seven percent but his government has struggled to lift growth rates in Southeast Asia’s largest economy, which is rich in resources but has suffered from a slump in commodity prices.
After several years of subdued economic output, government figures showed a glimmer of acceleration for 2016, with growth of 5.02 percent, compared with 4.88 percent a year earlier—the smallest expansion since 2009.
But a weaker-than-expected quarterly performance of 4.94 percent in the period October to December overshadowed the annual data compared with the median estimate of economists for a 5 percent growth. The growth in the fourth quarter was dragged down by a dip in government spending.
The statistics agency said that the top contributors for growth last year were manufacturing and agriculture.
Authorities unleashed a series of economic stimulus last year to reinvigorate growth, while the central bank cut the key interest rate six times.
Now analysts say there is little room for maneuver.
“Looser fiscal and monetary policies have helped to support growth over the past year, but further easing is unlikely over the next year,” said Gareth Leather of London-based Capital Economics.
Economists said while growth won’t slow further, it won’t accelerate further either, with Capital Economics maintaining its estimation for Indonesia at a flat rate of five percent for this year and next.
Southeast Asia’s biggest economy is still undershooting Widodo’s growth target of 7 percent amid a slowdown in China and lower commodity prices. That’s even after the central bank cut rates six times last year in a bid to boost lending and growth. While the economy is expected to pick up this year, with the International Monetary Fund forecasting 5.1-percent growth, the government is warning of headwinds from global uncertainty, including from policies being introduced by US President Donald Trump.
The recent rise in commodity prices has provided a strong terms-of-trade tailwind, said Weiwen Ng, an economist at Australia & New Zealand Banking Group Ltd. in Singapore.
“This, along with a stabilization in domestic demand, has mitigated the negative impact that fiscal spending cuts”•needed to minimize fiscal slippage in 2016″•have on Q4 growth.”
The data is disappointing with growth now expected to remain stuck at about 5 percent over the next couple of years as policymakers run out of scope for further stimulus, said Gareth Leather, senior Asia economist at Capital Economics Ltd. in London.
“The upshot of all this is that while growth is unlikely to slow further, we don’t expect it to accelerate either,” Leather said.