Indonesian economic growth in the third quarter slowed. This is line with predictions of GAMA Leading Economic Indicator which was generated on the basis of analysis of the   Macroeconomic Dashboard team.  Consensus results predicted that Indonesian economy would register the growth rate of   5.57% ± 0.28% in the quarter III-2013. The accuracy of GAMA LEI’s prediction and result of the Macroeconomic Dashboard consensus were very much in line with statistics released by the National Bureau of Statistics that showed Indonesian economic growth to have grown by 5.62% (y-o-y) in the quarter III-2013, which was lower than 5.83% (y-o-y) posted in the quarter II-2013.  

The depreciation of the exchange rate, the increase in the BI rate, and rising inflations, are factors responsible for slower economic growth recorded in quarter III-2013. The exchange rate which in June 2013 hovered around IDR 9,929 per USD by September 2013 had depreciated to IDR 11,613 per USD, which has had adverse impact on Indonesian trade.  Meanwhile, the increase in BI rate from 6% in June 2013 to 7.25% in September 2013 had the effect of increasing the cost offinancing. Besides, people’s purchasing power was drained by high inflation, which rose from 5.9% (y-o-y) in June 2013 to 8.4% (y-o-y) in September 2013.

Figure 1:  Growth Rate of GDP at Constant Price 2000 by Industrial Origin,  2009-2013* (y-o-y, in %)
The year 2013 is the lowest Indonesian economic growth after global financial crisis

Source:  BPS and CEIC (2013)
*= quarter III-2013

The Transport and Communications, Financial, Ownership and Business, as well as Construction industry are the highest growth in the national economy in quarter III-2013. However, such growth rate recorded in the quarter III, was lower than in the previous quarter. In quarter III-2013, Transport and Communications registered growth of 10.46% (y-o-y), but in the quarter II-2013, it posted higher rate of 11.45% (y-o-y). Meanwhile, Real Estate and Enterprise Services posted growth of 8.09% (y-o-y) in quarter III-2013, which is slightly lower than previous quarter that registered growth of 8.11% (y-o-y). Construction posted growth of 6.24% in the quarter III-2013, which was lower than 6.46% (y-o-y) in the previous quarter. In general, nearly all sectors within GDP based on industrial origin registered lower growth. Nonetheless, Services sector was the exception, as it grew by 5.62% (y-o-y) in the quarter III-2013, which represented an increase from 4.48% (y-o-y) in quarter II-2013. 

With regards to expenditure, slower economic growth of Indonesian is attributable to the decline in the investment. This is as a consequence of a rise in interest rate and depreciation of the exchange rate of Rupiah. Besides, the increase in BI rate coupled with the uncertainty in the global economy, have all contributed to lower investment growth in the economy.  In quarter III-2013, Gross Fixed Capital Formation recorded growth of 2.85% (q-to-q), which represented a significant decline from 5.22% q-to-q in quarter II-2013.  In annualized growth terms (y-o-y), growth in quarter III-2013 is largely attributable to Government Consumption, which posted 8.83% growth, Household Consumption which grew by 5.48%, and Gross Fixed Capital Formation which posted growth of 4.51%, Exports of goods and services that grew by 5.26%, and Imports of goods and services grew by 3.8%.

Figure 2: Growth Rate of GDP at Constant Price 2000 by Expenditure, 2009 – 2013* (y-o-y, in %)
Indonesian economy slowed due to decline in growth in investment

Source: BPS and CEIC (2013)
*= quarter III-2013

Deterioration of the economy has had adverse impact on employment. Based on data released by BPS, Indonesian work force increased from 118.05 million in August 2012 to   118.09 million in August 2013. However, out of that number, 110.80 million was recorded as employed in August 2013, which was a decrease of 10 000 people from 110.81 million in August 2012. Consequently, unemployment in August 2013 showed an increase of 150,000 people from 7.24 million (6.14%) in August 2012 to 7.39 million in (6.25%) in August 2013.  

Figure 3:  Participation rate and Open unemployment in Indonesia, February 2005 – August 2013 (in %)
The number of people unemployed increased by 150 000 people in August 2013 compared with August 2012

Source: BPS (2013)

Meanwhile, with respect to the main structure of employment, agricultural sector, Industry, and construction, registered a decline in August 2013 as compared with August 2012. The number of people employed in the Agricultural sector decreased from 38.88 million in August 2012 to 38.07 million in August 2013. Meanwhile, the number of people employed in Industry declined from 15.37 million in August 2012 to 14.88 million in August 2013. However, there was an increase in the number of people employed in in the Trade, Transportation, and Communications and Financial and Social Services sectors.