Indonesia's GDP beats estimates as government spending drives growth

Private consumption also provided a boost.

Indonesia's fourth-quarter gross domestic product (GDP) rose 5.04% year-on-year, beating more conservative consensus estimates of a 4.8% growth.

According to a report by OCBC, the surprise uptick was mainly driven by an increase in government spending, particularly the Jokowi administration's increased focus on infrastructure projects.

"Not only has the 44.3%qoq and 7.3%yoy growth in government spending in Q4 helped to contribute to the overall better-than-expected overall GDP print today, it would also become a signal to investors that the government might just have gotten its acts together. That can be a much more powerful multiplier effect beyond just the immediate pick-up in demand for extra jobs, goods and services from the projects," said OCBC.

Steady private consumption also provided a boost, as it grew by 4.92% year-on-year in Q4.

"Overall, the numbers from today’s GDP data suggest that there is a significant momentum for Indonesia’s economy as 2016 plays out. Our expectation is for growth to clock 5.1% growth. This is lower than the 5.2-5.6% pencilled in by the government, not so much because of domestic factors but due to global ones," OCBC noted.

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