warta kilat

The Indonesian economy probably sustained its pace of growth last quarter as the nation’s central bank averted the interest-rate increases that have contributed to a slowdown in neighbors across Asia.

Gross domestic product climbed 6.5 percent from a year earlier, compared with 6.46 percent in January through March, according to the median of 16 estimates in a Bloomberg News survey before tomorrow’s release of the data.

The central bank has refrained from raising borrowing costs for five meetings to support consumer spending in the world’s fourth-most populous nation, relying on a rising rupiah to curb price gains. With inflation easing for a sixth straight month in July, Bank Indonesia will keep its benchmark rate unchanged at 6.75 percent on Aug. 9, all 16 economists said in another survey.

“Indonesia is the only economy in the region that is expected to buck the trend of moderating growth and domestic consumption is still very strong,” said Gundy Cahyadi, a Singapore-based economist at Oversea-Chinese Banking Corp. “The central bank will push back the need for rate hikes as inflation has been coming down and they see no reason for higher rates at this point.”

The rupiah has climbed about 6 percent against the dollar this year, the second-biggest appreciation among major Southeast Asian currencies, according to data compiled by Bloomberg. The benchmark Jakarta Composite stock index has jumped 11.2 percent over the same period, the biggest rise in Asia after Mongolia.

The currency fell 0.1 percent to 8,489 per dollar as of 11:52 a.m. local time, as Asian currencies declined after Japan intervened in the foreign-exchange market to weaken the yen. The stock index slipped 0.4 percent.

Indonesia’s GDP may have expanded more than 6.5 percent last quarter, Bank Indonesia Deputy Governor Hartadi Sarwono said yesterday. The central bank forecasts growth of as much as 6.8 percent this year, after a 6.1 percent expansion in 2010.

Indonesia is less vulnerable to swings in global demand compared with its Asian neighbors as it doesn’t depend as much on exports to spur growth. The nation is “at the bottom of the league” in Asia for growth volatility, Robert Prior-Wandesforde, an economist at Credit Suisse Group AG in Singapore, said last month.

Elsewhere in Asia, growth has slowed in economies from Singapore to Taiwan as Europe’s debt crisis and a struggling U.S. recovery crimp demand for exports. At the same time, persisting price pressures are complicating the task for some of the region’s central banks. China, India and Thailand have raised rates recently, while Malaysia and the Philippines opted to keep them unchanged.

President Susilo Bambang Yudhoyono’s government has held off from removing fuel subsidies this year and is importing rice to cool domestic prices as the world’s most populous Muslim nation observes the fasting month of Ramadan.

Consumer prices rose 4.61 percent last month from a year earlier, easing from a 5.54 percent pace in June, the statistics department said Aug. 1. Bank Indonesia predicts inflation will be 4 percent to 6 percent this year.

“There’s no pressure for the central bank to raise rates this month and probably until the end of this year because the rupiah continues to strengthen and inflation seems manageable,” said Juniman, chief economist at PT Bank Internasional Indonesia in Jakarta.

Southeast Asia’s biggest economy is one step away from its first investment-grade credit rating in more than a decade as Yudhoyono targets growth of as much as 6.6 percent on average through the remainder of his term ending in 2014. He plans to double spending on roads, ports and airports to $140 billion by then after inadequate infrastructure hampered growth.

Foreign direct investment increased 21.1 percent to 43.1 trillion rupiah ($5.1 billion) in the second quarter from a year earlier, according to the Investment Coordinating Board. Totalinvestment rose 22.1 percent last quarter.

Indonesia’s commercial loans this year will probably surpass the central bank’s estimate as lowinterest rates help drive demand, PT Bank Central Asia, the nation’s largest lender, said last month.

“Bank Indonesia will hold interest rates to support loan growth and encourage economic growth,” said Destry Damayanti, chief economist at PT Bank Mandiri in Jakarta. “Export volumes are still growing and significant increases in foreign direct investment are contributing to the economic expansion.”

To contact the reporter on this story: Novrida Manurung in Jakarta at