Mandiri Sekuritas Macroscope

4Q08 GDP: Global crisis hits home harder than expected

Indonesia’s economy contracted by 3.6% qoq or increased by 5.2% yoy in 4Q08, lower than our and consensus estimates of 5.5% yoy and 5.7% yoy respectively. However, upward revisions in 3Q08 have helped maintain the 2008 economic growth at 6.1% yoy.

Significant slowdown in exports brought down economic growth lower than our projection. Exports only grew by 1.8% yoy, while imports contracted 3.5% yoy in the 4Q08. Private consumption and investment growth moderated to 4.8% yoy and 9.1% yoy.

On the production side, slower economic growth was mainly driven by drop in manufacturing sector, which growth declined to 1.8% yoy in the 4Q08 (v.s 4.3% yoy in the previous quarter), followed by trade and construction (5.6% yoy and 5.7% yoy respectively). Meanwhile agriculture, mining and communication sectors grew relatively well by 4.7%, 2.1% and 32.9% yoy, which have been supported by modest domestic demand.

Lower-than-expected 4Q08 economic growth suggests that the impact of global economic slowdown have a grater impact on the economy. Thus, we expect the authority to continue to push forward its fiscal stimulus package and monetary policy loosening.