Indonesia's GDP Grows 6.5%; Fastest Pace Since 1997 (Update2)<http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ayUAFe9gu1PI>
By Aloysius Unditu and Arijit Ghosh [image: Enlarge Image/Details]<http://www.bloomberg.com/apps/news?pid=photos&sid=ayUAFe9gu1PI> Nov. 15 (Bloomberg) -- Indonesia's economy expanded 6.5 percent in the third quarter, the fastest pace since the 1997 Asian financial crisis, spurred by bumper harvests and rising sales of cars, motorcycles and homes. Growth in Southeast Asia's largest economy accelerated from 6.3 percent in the second quarter, the Central Statistics Bureau said today in Jakarta. That beat the 6.2 percent expansion expected by economists and was the biggest gain since the first quarter of 1997. Agricultural production, which provides a livelihood for almost half of Indonesia's 234 million people, increased the most in six years on heavier-than-usual rains. The faster-than expected growth, coupled with record global oil prices, may prevent Bank Indonesia from further reducing borrowing costs after 13 cuts since the start of last year. ``With inflation having picked up, there seems no reason for the central bank to cut rates again,'' said Robert Prior- Wandesforde, senior economist at HSBC Holdings Plc in Singapore. Bank Indonesia ``is already set to miss'' its 2007 inflation target of 4 percent to 6 percent. The benchmark stock index rose as much as 0.9 percent after the announcement. It was up 0.3 percent at 2699.84 at 3:33 p.m. in Jakarta. Indonesia's central bank Senior Deputy Governor Miranda Goeltom earlier this week ruled out more rate cuts in the ``very near future'' as rising oil costs threaten inflation. Crude has risen more than 50 percent this year. `Unexpected Factor' Farm output rose 8.9 percent in the third quarter after increasing 2.4percent in the previous three months, according to today's report. Private consumption growth quickened to 5.3 percent from 4.6 percent. ``The unexpected factor is the good performance of agriculture,'' Coordinating Minister for the Economy Boediono said in an interview in Jakarta today. Food production is expected to improve further in coming months and government spending normally increases in the fourth quarter, he added. ``I think the government will now be able to achieve its 6.3 percent growth forecast for this year,'' said Destry Damayanti, an economist at PT Mandiri Sekuritas in Jakarta. ``We will have to raise our estimate'' from 6.1percent. Indonesia increased its 2007 estimates for unhusked rice and corn output for a second time this year on Oct. 30. The country may produce 56.89 million metric tons of unhusked rice this year, up from a July forecast of 55.13million tons and 54.45 million tons projected in March. Cars, Cigarettes Rising farm income and easier credit in urban areas are helping companies including PT Astra International, Indonesia's No. 1 auto retailer, which posted its biggest quarterly profit in six years. PT Bank Central Asia, the nation's second-largest financial services company, said it expects 2007 loan growth to reach 20 percent, accelerating for the first time in three years. ``We have seen a recovery in people's purchasing power this year,'' said Sun Alexander Yapeter, a director at the Malang, East Java-based PT Bentoel International Investama, Indonesia's third-largest publicly traded cigarette company. Bentoel expects cigarette production to rise 45 percent this year, he said. Still, the government is ``worried'' a slowdown in the U.S. and other developed nations, coupled with surging energy prices, may affect growth in Indonesia, said Boediono. Oil Prices Crude oil prices reached an unprecedented $98.62 a barrel on the New York Mercantile Exchange on Nov. 7. That's above the $60 a barrel for local crude that Indonesia's government has factored into its inflation and growth forecasts for this year and 2008. Indonesia cut its forecast for non-oil export growth next year to about 15 percent from an earlier estimate of 18 percent on concern a global slowdown will sap demand for commodities including palm oil and tin, Trade Minister Mari Pangestu said in an interview earlier this week. ``Domestic consumption remains the main driver of growth,'' said Gundy Cahyadi, an economist at Ideaglobal in Singapore. An upswing in consumer spending and a recovery in investment is ``offsetting any slowdown from the external sector.'' Vehicle sales in Indonesia rose 20 percent in September from a year earlier, according to data from the Association of Indonesian Automotive Industries. Cement sales increased 11 percent to 2.5 million metric tons in October from 2.25 million tons a year earlier, PT Semen Gresik, Indonesia's largest cement maker, said in an e-mailed statement on Nov. 12. Government spending reached 506.7 trillion rupiah ($55 billion) in the first ten months this year, or 67.3 percent of its total target of 752.4 trillion rupiah, Finance Minister Sri Mulyani Indrawati said earlier this week. Indonesia forecasts economic growth at 6.3 percent this year and 6.8 percent in 2008. To contact the reporters on this story: Aloysius Unditu in Jakarta at [EMAIL PROTECTED] ; Wahyudi Soeriaatmadja in Jakarta at [EMAIL PROTECTED] . *Last Updated: November 15, 2007 03:52 EST* -- Salam ALX™
