Indonesian growth slows

Indonesia is beginning to feel the effects of the global economic downturn in the third quarter of 2008, as the economy grew at the slowest pace in over six quarters, due to the falling prices of their main exports: palm oil, rubber and coal.

Exports in Indonesia have fallen drastically as the global demand for raw materials has fallen, which has left the world’s biggest producer of palm oil and the second-largest maker of rubber in a difficult position, with the inevitable task of following Japan, another export dependent nation, into recession.

As the Economist Intelligence Unit (EIU) came to Indonesia with the overall aim to gain backing from the government and investors in a bid to cope with the slowdown in the country, it is clear that the economic downturn has depressed the mood in South East Asia’s largest economy.

The emerging economy only expanded by 6.1 percent in the third quarter from a year earlier, according to the Central Statistics Bureau in Jakarta, although it marks a 0.2 percent growth above analyst’s expectations.

Financial markets did not change from the better than expected growth rate, with the rupiah remaining at 11,760 per dollar although the Indonesia Composite Index was down 0.95 percent.

The government has announced that they will cut subsidised gas prices in December to reduce the blow on the economy.

Interest rates have remained at 9.5 percent as the rupiah has fallen by 20 percent against the dollar already this year.

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