Indonesia's economy expands 6.5 percent in 3rd quarter, fastest since Asian crisis

Indonesia's economy expanded a faster-than-expected 6.5 percent in the third quarter from a year ago, the government said Thursday, its strongest quarter of growth since the Asian financial crisis 10 years ago.

Agricultural production was the biggest contributor to growth, followed by business investment, exports and private consumption.

Growth in the July-September quarter was faster than the 6.3 percent marked in the second quarter, the Central Statistics Agency. It was also better than the 6.15 percent projected by economists.

Following the data release, President Susilo Bambang Yudhoyono said he was confident strong growth in the agricultural sector and improving investment would push growth to at least 6.4 percent in the current quarter.

Agricultural output grew 8.9 percent from the third quarter of last year while investment rose 8.8 percent on year. Export increased 7.8 percent on year and private consumption gained 5.3 percent on year, the agency said.

The Indonesian government forecasts the economy will grow 6.3 percent this year and an even faster 6.8 percent next year.

Meanwhile, the World Bank said in an estimate Thursday that Indonesia's economy could grow 6.4 percent next year, revising its forecast downward from 6.5 percent, as concerns remain over external conditions.

"Indonesia is seeing its strongest, most sustained period of expansion since the dark days of the Asian crisis 10 years ago," said Robert Prior-Wandesforde, an economist at HSBC's Asian Economics team. "There also seems little chance of things going badly wrong in the short term."

The Indonesia was one of the hardest-hit countries during the 1997-1998 Asian financial crisis, which bankrupted thousands of businesses and sent the jobless rate soaring.

Analysts said last quarter's growth was an encouraging sign of strong fundamentals, but also warned it may be partly artificial, driven largely by easing monetary policy. Bank Indonesia, the country's central bank, has cut its key interest rate 4.5 percentage points since last May to 8.25 percent. (The Jakarta Post).