RTTNews - Indonesia's economic growth slowed in the second quarter, but the economy expanded more than economists' expected.
The Indonesian economy expanded 4% year-on-year in the second quarter, slower than the 4.4% growth recorded in the first three months of the year, the statistical agency reported Monday. The annual growth rate topped economists' expectations for a 3.8% expansion.
The better than expected economic growth was led by increases in transport and communication, services and in utility items. But, growth in the agricultural sector slowed.
Compared to the first quarter, gross domestic product or GDP rose 2.3%, quicker than the 1.7% increase in the first three months of the year and 2.1% growth expected. The economy expanded 4.2% in the first half, compared to the same period of the previous year.
The resilience of the economy in the midst of the global economic crisis is attributed to the election-related spending. The government had announced a fiscal stimulus package of around 1.4% of GDP in February 2009.
In the poll held on July 8, President Susilo Bambang Yudhoyono won about 60% of the vote and was re-elected to lead the nation for another five-year term.
After the presidential election, consumer confidence rose to its highest level for nearly five years on hopes that the economy would see improvements. In its consumer confidence survey report for July, the Bank Indonesia said the peaceful election appeared to give respondents a positive signal of economic conditions.
On the monetary policy front, the Bank Indonesia supported the economy by continuously cutting its key interest rate. In August, the central bank made its ninth straight reduction, which took the rate to a record low of 6.5%.
In the second quarter, consumer spending rose 4.8% compared to the previous year, while government expenditure grew 17%. Gross fixed capital formation increased 2.7%. Exports of goods and services decreased 15.7%.
The International Monetary Fund in late July recommended Indonesia to continue its stimulus package and to follow a 'cautious' monetary policy stance. The international lender expects the Indonesian economy to grow 3.5% in 2009 and by 4.5% in 2010.
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