INSTANT VIEW 4-Indonesia's GDP up 4.21 pct yr/yr

Published: 09 Nov 2009 23:18:41 PST

JAKARTA, Nov 10 - Indonesia's gross domestic product rose 4.21 percent in the third quarter from a year ago, data showed on Tuesday, in line with forecasts and likely supported by higher consumer spending.

Analysts polled by Reuters had forecast annual growth in Southeast Asia's biggest economy would accelerate to 4.15 percent from a revised 4.04 percent in the second quarter and a revised 4.45 percent in the first quarter.

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KEY POINTS:

* Q3 GDP up 4.21 pct on year, versus forecast 4.15 pct gain

* Q3 GDP up 3.87 pct q/q, versus forecast 3.86 pct gain

For a graphic: http://graphics.thomsonreuters.com/119/ID_GDP1109.gif

COMMENTARY:

ENRICO TANUWIDJAJA, ECONOMIST, OCBC, SINGAPORE

"We have revised our Q4 GDP forecast to 4.5 percent and upgraded our 2009 GDP forecast from 3.80 percent to 4.30 percent to take into account the better-than-expected Q3 figures as well as signs that the real economic recovery is gaining traction in the local economy.

"Secondly, imports have shown less contraction in recent months, suggesting that businesses are currently bracing for recovery and likely to benefit from the strengthening rupiah as well as lower interest rate environment.

"The local currency vis-a-vis the US dollar should move towards its stronger side in tandem with growth pick-up, barring any unforeseen sustained comeback of risk aversion. Nevertheless, Indonesia needs to (return) to its 6 percent quarterly growth to ensure that unemployment is kept under control and to generate jobs for its increasing labour market participants."

EUBEN PARACUELLES, ECONOMIST, ROYAL BANK OF SCOTLAND

"It's in line with my expectations. I think the central bank will also not be surprised by these numbers based on last week's policy statement. So I still do not expect them to signal a shift to a more hawkish stance any time soon.

"Q4 GDP is likely to strengthen, particularly as consumer confidence remains robust and the government following the elections is now re-focusing on fully implementing the stimulus plan. That said, I share BI's view that inflation could normalise in that environment but not exceed their targets (so it would not) warrant a change in the policy stance in the near-term."

SONG SENG WUN, ECONOMIST, CIMB, SINGAPORE

"We see a sustained recovery in domestic consumption and in investment that is probably set to gather momentum going into 2010, as Indonesia is flavour of the year on the back of political stability and SBY (President Susilo Bambang Yudhoyono) providing confidence.

"If you look at the corporate sector, it shows the economy is doing reasonably well. Look at same-store sales, motorbike sales, they are holding up, with the suggestion of a consumption recovery. The average man in the kampung is not splashing out, whereas at the middle to upper end, those with a brokerage account, they are doing much better and able to spend. At the upper end, the wealth effect from higher equity performance, means Indonesians are out spending in Singapore."

JOANNA TAN, ECONOMIST, FORECAST PTE, SINGAPORE

"Political stability and a resilient domestic sector have helped boost growth in Q3.

"Looking ahead, growth in Q4 is expected to remain on the recovery path and full-year growth should see a 4.4 percent print. The government is expected to continue with fiscal support for the economy though monetary policy may turn hawkish in Q1 next year given inflationary risks and the global monetary policy landscape. I am still looking at a rate hike somewhere in Q1."

PRAKASH SAKPAL, ECONOMIST, ING FINANCIAL MARKETS, SINGAPORE

"We were more bullish than 4.21 percent but it is still a better number than the second quarter, which is a good thing. It should be mostly domestic demand-driven expansion in the economy.

"Based on strong consumer confidence, I think private consumption was still the main driver of GDP growth. Actually growth was pretty in line with what the government has expected. They have forecast 4.1-4.3 percent so it is pretty much in that range. I don't see any major policy implication as yet."

"We are forecasting further acceleration in GDP growth to 4.8 percent in the fourth quarter of this year. We expect policy tightening to start in the first quarter of next year not during the rest of this year." ROBERT PRIOR-WANDESFORDE, SENIOR ASIAN ECONOMIST, HSBC "It's a pretty good result, it surprised me, but I think going forward, while Indonesia is going to continue to improve, it's probably going to see amongst the smallest improvements of the main Asian countries.

"That's because they saw among the smallest falls, and are not as open as most Asian economies, so won't see so much from the upturn of the trade cycle, and thirdly, the central bank and government hasn't eased policy as much as most other central banks. We see growth of 5.8 percent in 2010, and 4.3 percent in 2009. I still think more open economies will see bigger improvements."

MARKET REACTION:

- Bond yields were largely unchanged.

- The rupiah <IDR=> slipped slightly to 9,435 per dollar at 0713 GMT after the data announcement.

- The Indonesia Composite Index <.JKSE>, which has been little changed, fell 0.4 percent at 0713 GMT after the announcement.

LINKS:

- For more data on the country's GDP, Indonesia's statistics bureau website is: http://www.bps.go.id.

BACKGROUND:

* The central bank (BI) signalled on Wednesday -- after keeping rates <BIPG> unchanged at a record low of 6.5 percent -- that it was not in a hurry to start hiking rates and talked about a further decline in near-term price pressure. [ID:nJAK48905]

* Finance Minister Sri Mulyani Indrawati predicted annual economic growth of between 4.1-4.2 percent in the third quarter, in line with the central bank's forecast of 4.2 percent.

* The central bank expected the economy would grow 4.0-4.5 percent this year, against a previous forecast of 3.5-4 percent.

* Indonesia avoided recession during the downturn, unlike many other countries.