2014-04-02 21:39:01 - Indonesia Freight Transport Report Q1 2014 - a new market research report on companiesandmarkets.com
2014 Growth Forecast Reduced As Headwinds Strengthen After strong growth, the Indonesian economy has entered a difficult patch. A flight away from the rupiah and toward US dollar assets has combined with a widening current account deficit (4.4% of GDP in the second quarter) and continuing concerns over inflation (running at around 8.6% in the third quarter) to cause a degree of uncertainty. In this context Bank Indonesia has had to adapt a tightening stance on monetary policy, pushing up the benchmark interest rate in various steps since mid-2013. In August, the government announced a stimulus package offering tax cuts for labour intensive and commodity export sectors. Adding to the overall picture Indonesia is entering an electoral period, with legislative
polls due in April 2014, followed by presidential elections in July of the same year.
The economic policies of the front-running candidates are not yet entirely clear. Taking all this into account we have reduced our 2014 GDP growth forecast to +5.3% (down from +6.0% in our last quarterly report).
This reflects what we see as a slowdown in investment and private consumption during the year. To be sure, our long-term outlook remains sanguine, with real GDP growth projected to average 6.2% per annum over the coming decade. Much of this, however, will be driven by strong growth in fixed capital. Should improvements in the investment climate stall or reverse - after all, the country is still ranked at a lowly 120th in the World Bank´s Doing Business 2014 report - Indonesia could fail to realise its strong growth potential.
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