JAKARTA, KOMPAS.com - Indonesia's economy grew last year at its fastest pace since the 1997-98 Asian crisis, with the country's large domestic market helping to shield it from the global economic turmoil battering its more export-oriented neighbors.
Gross domestic product expanded 6.5% in 2011, affirming Indonesia as one of Asia's fastest-growing economies. In recent years, some companies and investors have touted Indonesia as the next India or China, as strong growth and relative political stability boost confidence in its fortunes.
Foreign direct investment in Indonesia grew 20% to a record $20 billion last year as companies invested in areas such as coal mines and car factories to tap the country's vast natural resources and 240 million-strong consumer market.
Executives and investors complain that Indonesia lacks the legal protections and infrastructure needed to bump growth into double digits. Yet its GDP has grown more than 5% in seven out of the past eight years, and even in 2009 -- when many countries slumped into recession -- Southeast Asia's largest economy managed to squeeze out 4.5% growth.
The Central Statistics Agency announced Monday that the economy expanded 6.5% from a year earlier in the October-December quarter, driven by strong household consumption and capital investment. That matched the previous quarter's growth and was in line with market expectations.
Economists generally are optimistic that the economy will remain resilient this year, especially with the central bank keeping monetary policy easy. Bank Indonesia is expected to keep its policy rate at 6%, a record low, when it meets Thursday, but has tinkered recently with deposit rates to boost market liquidity.
“Indonesia will remain a beacon of growth in a world where growth is scarce,“ Credit Suisse economist Kun Lung Wu said. “We expect real GDP growth to remain strong at around 6% in 2012, but we think there is a risk that policy could remain too loose for too long.“
All sectors except mining grew last year, said Suryamin, the statistics agency's acting head, who like many Indonesians goes by a single name. Telecommunications, hotel and restaurant and financial companies showed the biggest growth.
Net profits of companies listed on the Indonesian Stock Exchange may rise an average of 27% last year and 18% this year, said Ferry Wong, head of Indonesian equity research at Citigroup. The passage of a bill in December that aims to expedite land purchases for infrastructure projects bodes well for investment over the long term.
“The land bill could spur growth of the construction sector by around 30% annually,“ said M. Choliq, chief executive of unlisted state-owned construction firm PT Waskita Karya.