JAKARTA (May 5): Indonesia's economic growth in the first quarter slumped to its weakest annual pace since 2009, leaving its central bank in a bind as rising inflationary pressures and a faltering currency crimp its ability to jump-start Southeast Asia's biggest economy.

The data throws a harsh light on President Joko Widodo, whose business-friendly credentials have already been questioned six months into his tenure, with policy inertia and rifts inside his own party undercutting an ambitious economic revival plan.

Gross domestic product (GDP) rose 4.71 percent in January-March from a year ago, hit by a collapse in commodities and weak government spending, and below the market's median forecast of 4.95 percent. In the fourth quarter GDP rose 5.01 percent.

"Sequential growth momentum probably has bottomed in the first quarter already but the recovery is looking fragile," said Santitarn Sathirathai, economist at Credit Suisse.

"Monetary policy easing cannot be done right away as inflation remain elevated and risk of U.S. Fed hikes looms."

Annual inflation is running at 6.79 percent in April, up from 6.39 percent in March, limiting the room for Bank Indonesia to add to its February cut to interest rates.

Moreover, the central bank is leery of triggering a flight of capital and putting more pressure on a beleaguered rupiah currency, which with a loss of 5 percent in the year is the worst performer in emerging Asia.

With its large current-account deficit and foreigners holding a lot of rupiah debt, Indonesia is seen as especially vulnerable to outflows.

Indeed, the rupiah slid to 13,040 per dollar, its lowest since April 1, after the GDP data.

POOR PERFORMANCE ALL ROUND

All sectors took a hit in the first quarter, the statistics bureau chief Suryamin told a press conference, with the manufacturing sector slowing and mining shrinking 2.32 percent.

The collapse of commodity prices has seen exports from Indonesia slumping 11.67 percent in the first quarter year-on-year, while imports also fell 15.10 percent.

Some analysts say the economy is flirting with recession. On a seasonally unadjusted basis, GDP contracted 0.18 percent from the previous quarter, after shrinking 2.06 percent in the October-December quarter.

"Across expenditure categories, government investment emerged as the clear culprit behind the surprisingly weak GDP number," economists at ANZ said.

REBOUND MILD?

The extent of any rebound in growth will largely depend on infrastructure projects being implemented, analysts said, noting investor disappointment with the slow pace of reforms.

Widodo, who came to power six months ago with high hopes and a promise to beef up the country's creaking infrastructure, has been hamstrung by rifts inside his own political party and squabbles between government agencies.

"Distracted by political skirmishes in-country and by diplomatic hurdles caused by the executions of foreign convicted felons, progress was slow on policy-driven reforms that would signal commitment to growth," said John Kurtz, Asia Pacific head at consultancy A.T. Kearney.

While Widodo has slashed fuel subsidies and freed up billions of dollars for long-neglected capital spending, many infrastructure projects are tied up in red tape.