Indonesia's 2011 Economic Growth Strongest Since 1996

Indonesia's economy expanded at the fastest pace since 1996 last year as strong consumer spending and investment helped offset slackening export growth, the latest figures from Statistics Indonesia showed Monday.

In 2011, the Southeast Asia's largest economy grew 6.5 percent, faster than the 6.1 percent expansion in the prior year. This was the fastest growth rate since 1996, according to data available with the International Monetary Fund.

In the fourth quarter, the gross domestic product expanded 6.5 percent, the same pace as in the previous three-month period. This was in line with economists' expectations.  

Sequentially, GDP shrank 1.3 percent after expanding 3.5 percent a quarter ago. However, the rate of decline was smaller than the 1.5 percent GDP drop expected by economists.

In December, the country regained its 'investment grade' after 14 years when Fitch Ratings upgraded its long-term foreign and local-currency issuer default ratings to BBB- from BB+, with a 'stable' outlook.

Last month, Moody's also lifted Indonesia's ratings to investment grade, citing gains in investment spending, improved prospects for infrastructure development as well as a well-managed financial system.

The government is looking to boost consumption further this year and raise infrastructure spending to aid economic growth. Meanwhile the rating upgrade is expected to contribute to investment boom. In December, Indonesia's parliament approved a long-awaited land acquisition bill in a big boost to the government's planned infrastructure projects.

Investment in 2011 climbed 8.8 percent compared to 2010, while consumer spending rose 4.7 percent. Exports grew 13.6 percent from a year earlier and imports were up 13.3 percent, according to the statistical office.

Bank Indonesia delivered two consecutive rate cuts last year and has kept the rate steady from then to shield the economy from the impact of the European debt crisis and the global economic slowdown.

The central bank expects the economy to grow 6.3-6.7 percent in 2012. The growth is projected to accelerate to 6.4-6.8 percent in 2013 due to improving global growth.

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