By I Made Sentana

JAKARTA--Indonesia's economy slowed slightly in the fourth quarter, as a drop in government spending outweighed improvements in exports and investment.

Southeast Asia's largest economy grew 4.94% in the fourth quarter compared with the same period a year earlier, weakening from a 5.0% expansion in the July-September period, the official Statistics Agency said Monday. Sequentially, the economy contracted by 1.77% from the previous three months, though this was mainly attributed to seasonal factors.

For 2016, gross domestic product growth was 5.02%, accelerating from a six-year low of 4.79% in 2015, according to agency figures.

A poll of economists by The Wall Street Journal had forecastfourth-quarter growth at 5.1% from a year earlier, a 1.75% quarter-on-quarter contraction, and a 5.07% expansion for 2016.

Bank Indonesia, which cut interest rates by 1.5 percentage points last year and relaxed regulations on commercial banks' lending, expected the economy to grow 5.0% in 2016.

Household consumption, which contributes about half of GDP, grew 4.99% from a year earlier in the fourth quarter, slowing from 5.01% in the third quarter. Government spending fell 4.05% from a year earlier, after falling 2.95% in the July-September period.

Investment, however, grew 4.80% compared with 4.24% growth in the quarter before.

"We expect investment to continue improving in the future" after the government launched various measures to make it easier for companies to do business in the country, agency Chairman Suhariyanto said.

The agency said exports grew 4.24% after falling 5.65% in the previous quarter, thanks to a recovery in global commodity prices.

The International Monetary Fund gave a favorable assessment of Indonesia's economy Friday, saying its near-term outlook remained favorable. It said Indonesia had maintained economic stability thanks to a prudent mix of macroeconomic policies and the launch of structural reforms that helped the economy weather slow global growth, a commodity downturn, and several episodes of financial turbulence.

Trinh Nguyen, an economist with Natixis, said although fourth-quarter growth was below many economists' expectations, she believes the worst is over. She expects Bank Indonesia won't cut rates for the rest of the year.

Write to I Made Sentana at i-made.sentana@wsj.com

(END) Dow Jones Newswires

February 06, 2017 00:50 ET (05:50 GMT)

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