Economist E.Tanuwidjaja at UOB Group, reviewed the growth prospects for the Indonesian economy in the next couple of years.
Key Quotes
“Indonesia’s GDP growth slowed to 5.02% yoy in the July – September 2019 period, marking the weakest pace since 2Q17. The slowdown was largely driven by weaker consumption as well as softer government and investment spending. Meanwhile, net exports were relatively flat, suggesting that exports remained weak amidst the global economic slowdown”.
“Household consumption, which makes up more than half of the country’s economy slowed to 5.01% yoy in 3Q19″¦ as the effect of election-related spending and seasonal factors “¦ faded. Government expenditure posted significantly slower growth at 0.98%… Moreover, investments showed only an expansion of 4.21% yoy”¦ Exports of good and services managed to record better performance than the 2 previous quarters this year”.
“Going forward, we might see private consumption and investment growth picking up following the President Joko Widodo’s announcement of the cabinet and his second term inauguration last October. In addition, Bank Indonesia (BI) has cut the benchmark rate by a total of 100 bps (to 5.00%) so far in order to boost the sluggish growth momentum. In our view, the latest GDP print will not likely push BI into further rate cuts. Nevertheless, BI will remain accommodative and ensure that liquidity remains adequate. On the other hand, fiscal policy will be in the spotlight, given the central bank might have reached its limit in stimulating the economy through the monetary policy. The government has pledged to push up the budget deficit to 2.0%-2.2%. On balance, given weak external prospects, we keep our headline growth figure at 5.1% for 2019 and hold a cautiously optimistic view that the economy will grow at 5.2% for 2020“.
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