Indonesia's economic growth dipped in the third quarter to its slowest annual pace in a year as consumers and businesses were confronted with higher inflation and interest rates, data showed on Monday.
Southeast Asia's largest economy grew 5.34 percent in the third quarter from a year earlier, better than market forecasts of 5.0 percent growth but slower than an annual rate of 5.84 percent in the second quarter, the statistics bureau said.
Analysts predicted growth would slow further in the fourth quarter as consumer spending, which accounts for two-thirds of the economy, remained weak with inflation and interest rates seen staying in double-digits after sharp fuel price hikes last month.
"Although it was above consensus, I think the market has taken a forward-looking approach. In the fourth quarter, I think growth will slow down and that's why the stock market did not react much," said Adrian Rusmana, head of research at BNI Securities in Jakarta.
Jakarta stocks ended up 0.7 percent, having been up 0.2 percent before the data, while the rupiah was quoted at 10,035 per dollar at 0915 GMT, strengthening slightly from around 10,100 before the GDP announcement.
Bond prices were largely unaffected.
Juniman, an economist with Bank Internasional Indonesia, predicted annual growth in the fourth quarter would be around 5.1 percent. That compared with the central bank's forecast on November 1 that growth would be 5.5-6.0 percent in the fourth quarter after an estimated third-quarter rate of 5.2-5.7 percent.
Weak investment was a drag on overall growth. Investment grew by 9.18 percent, weaker than a revised annual 14.54 percent rise in the second quarter.
"This is closely related to interest and inflation rates. Interest rates are likely to keep rising until the first quarter next year. After that, economic growth should pick up again," said Wiling Bolung, head of trading at HSBC in Jakarta.
Consumer spending was hit after higher global oil prices sent the rupiah tumbling to a four-year low in August - which led to sharp interest rate rises by the central bank - and fuelled inflation. Consumer inflation jumped to 17.89 percent in October, its highest in more than six years, after the government raised domestic fuel prices by a 126 percent to cut the cost of its subsidy bill. The CPI rise prompted the central bank to raise its key BI rate to 12.25 percent on November 1
Donsyah Yudistira, debt market analyst at brokerage Mandiri Sekuritas, said the slowdown in the third quarter might ease pressure on the central bank to raise rates much further.
"After this slowing down in the economy, we predict interest rates will fall next year. This should be positive for the bond market," Yudistira said.