Jakarta: Indonesia`s economic growth slipped to its weakest in five years in 2014 as weak exports and investments dragged, underlining the challenges facing the country`s new President Joko Widodo.
Southeast Asia`s largest economy is finding it harder to fire up its engines of growth with the ending of the commodities boom and as high interest rates weigh on domestic demand.
The economy expanded 5.02 percent last year, slower than growth of 5.58 percent in 2013. In the fourth quarter, the economy grew a slightly better than forecast 5.01 percent from a year earlier, but contracted 2.06 percent against the third quarter, on a seasonally unadjusted basis.
"Today`s disappointing figures, which were broadly in line with consensus, help to underline the challenge facing the country`s new president, Joko Widodo, who despite a promising first few months in office faces a tough challenge to reinvigorate the economy," said Gareth Leather from Capital Economics.
The London-based consulting firm said growth was expected to be flat this year and unlikely to rebound in the near term "with weak commodity prices and high interest rates set to weigh on economic activity."
Investments grew 4.12 percent last year, weaker than both historical trends and growth of 5.28 percent in 2013, the statistics bureau said on Thursday.
Government spending was also much weaker during the year, which Suryamin, head of the statistics bureau, said was related to a slash in ministries` expenditure in the 2014 budget.
But Aldian Taloputra, analyst with Mandiri Sekuritas in Jakarta, said growth had struck a bottom in the final quarter of last year and would only pick up from there.
"Investment may be a little bit slow in the first half of the year, but we expect it to pick up in the second half with big infrastructure projects by the government."
The government has set a growth target of 5.6-5.8 percent for 2015 based on higher investment and government spending.
To help achieve that, Widodo set up a government agency to serve as a one stop service for investment licences in a bid to make things easier for investors.
The president, in his first full year in office this year, will also use the fiscal windfall from removing gasoline subsidies to improve the country`s creaky infrastructure.
Analysts in a Reuters poll had forecast 4.95 percent year-on-year growth in the fourth quarter, and a contraction of 1.48 percent against the third quarter.
The rupiah was at 12,645 per dollar, slightly weaker than the previous close, and the main stock index was off 0.60 percent after the data.
