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Indonesian growth slowest since 2009 in second quarter

Indonesian growth slipped to its slowest pace for almost five years in the second quarter, official data showed on Tuesday (Aug 5), highlighting the huge economic challenges facing the president-elect Joko Widodo.

JAKARTA: Indonesian growth slipped to its slowest pace for almost five years in the second quarter, official data showed on Tuesday (Aug 5), highlighting the huge economic challenges facing the president-elect Joko Widodo.

Southeast Asia's top economy expanded 5.12 per cent on-year in the three months to the end of June, the national statistics agency said, the slowest annual rate since the last quarter of 2009 and below economists' forecasts of 5.3 per cent. A key contributor to the slowdown was a controversial ban on the export of some unprocessed minerals,which was introduced in January and hit the vital mining sector, the agency said.

The Indonesian economy has expanded at around 6 per cent in recent years but it has been easing in the past 12 months due to slowing demand for commodity exports, and interest rate hikes in 2013 during emerging market turmoil.

The disappointing data underscores the tough task ahead for new leader Widodo, the reform-minded governor of Jakarta who has pledged to revive the G20 economy when he takes office in October. Widodo, known by his nickname Jokowi, has vowed to lift growth to 7 per cent within two years, but many economists consider the target ambitious. Growth for 2013 came in at 5.78 per cent, the slowest pace of expansion for four years.

Gareth Leather from Capital Economics said Tuesday's growth data showed the "scale of the challenge" facing Widodo. "Hopes for a recovery largely rest on the new government," he said. "Joko Widodo has certainly raised hopes that he could usher in a wave of reforms. However, it is far from clear if the new president will be able to live up to investors' lofty expectations."

Foreign companies operating in Indonesia have long complained of nationalistic policies, particularly in the resources sector, rampant corruption, and creaking infrastructure.

The second quarter growth was down from 5.2 per cent expansion in the first quarter. As well as the mining sector, growth in the manufacturing sector - such as the production of textiles and leather goods - also slowed, said statistics chief Suryamin, who like many Indonesians goes by one name. However household consumption, a key driver of the economy, remained robust, growing 5.6 per cent in the second quarter, the data showed.

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