The Indonesian economy is set to recover from pandemic shock as the economy re-opens and vaccines are deployed. Economists at Standard Chartered expect BI to squeeze in a 25bps policy rate cut to accelerate recovery, before pausing for the year and remain constructive on the IDR, given a manageable C/A deficit, relatively high carry and a weak USD.
Key quotes
“We forecast 2021 GDP growth at 6.0%, following a 1.7% contraction in 2020, on normalisation of economic activity, low base and exports recovery.
“Inflation will increase gradually to 2.9% by year-end. Below-potential growth and stable food prices to keep inflation at BI’s target.”
“We expect another 25bps policy rate cut in February to 3.5% before BI pauses in H2. BI again likely to focus on quantitative easing to support fiscal stimulus.”
“We expect USD/IDR to strengthen to 13,800 by end-2021, amid manageable C/A deficit, relatively high carry and a weak USD.”
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