UPDATE 1-Indonesia's economy grows faster than expected, rupiah firms

Indonesia, Southeast Asia's largest economy, posted slightly faster than forecast growth in the October-December quarter and its full-year 2018 expansion was the best in five years, supported by steady household spending. Gross domestic product (GDP) in the final quarter of 2018 expanded 5.18 percent from a year earlier, compared with 5.11 percent forecast in a Reuters poll and the 5.17 percent posted for July-September.

Full-year 2018 growth was 5.17 percent, higher than the poll's 5.15 percent forecast and marking a third year of a pick-up after the pace dropped to 4.88 percent in 2015. The rupiah strengthened slightly after the data while the stock market remained steady.

While last year's growth was the best since 2013, it was below the government's 5.4 percent target and the 7 percent Joko Widodo, when campaigning for election as president in 2014, had pledged to reach. Despite the better-than-expected data, statistics bureau chief Suhariyanto warned of economic risks this year.

"A lot of projections for our economy in 2019 have showed many challenges...with our major trading partner seen growing more slowly," Suhariyanto told a news briefing. The GDP data is the last before Indonesia's general elections on April 17. Widodo is seeking a second five-year term and faces the same opponent as in 2014 - former general Prabowo Subianto, who has accused the president of economic mismanagement.

Widodo has built infrastructure across the archipelago and kept inflation low despite the rupiah plunging to a 20-year low, which was a reason household spending was steady in the fourth quarter. Household spending represents over half of Indonesia's GDP. Investment grew slightly slower in the fourth quarter versus the July-September quarter and foreign trade still provided negative contribution to GDP with imports again outweighing exports, the data showed.

Jakarta is working on a number of incentives to boost shipments. State-owned Eximbank has already been tasked to provide lenient export financing and the trade minister said he might scrap surveyor requirements for some exports. The government's target for growth this year is 5.3 percent while the central bank sees 5.2 percent. Both have been saying domestic demand would be the main driver of growth, followed by investment, while their outlook on exports remains bleak. (Writing by Gayatri Suroyo; Editing by Jacqueline Wong)

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