2014-01-07 22:40:44 - Recently published research from Business Monitor International, "Indonesia Shipping Report Q1 2014", is now available at Fast Market Research
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 of 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 +5.4% (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. 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.
Full Report Details at
- www.fastmr.com/prod/754730_indonesia_shipping_report_q1_2014.asp ..
Our shipping and ports forecast for 2014 shows a significantly slower pace of growth, as the economy slows. This slowdown will be partially offset by something of a recovery in foreign trade which we expect during the course of the year, helped by the government's recent export stimulus package. Over the medium to longer term we continue to think that the key to sustainable growth is investment in port infrastructure, including road and rail links in the hinterland areas. We are encouraged to see some evidence of progress on this front.
Headline Industry Data
* 2014 Tanjung Priok total tonnage forecast to grow 4.0% to 55.193mn tonnes, with average annual growth of 4.9% expected over our forecast period to 2018.
* 2014 Palembang total tonnage forecast to grow 2.6% to 12.73mn tonnes, with average annual growth of 3.7% over our forecast period.
* 2014 Tanjung Priok container throughput forecast to grow 7.7% to 7.37mn twenty-foot equivalent units (TEUs), with average year-on-year (y-o-y) growth of 9.6% over our forecast period.
* 2014 Palembang container throughput forecast to grow 4.1% to 109,833 TEUs, with average y-o-y growth of 5.6% over our forecast period.
* Indonesian foreign trade (exports + imports) expected to grow by 5.6% in real terms in 2014, up from 2.3% in 2013.
Key Industry Trends
More Ships Are Flying The Indonesian Flag: The implementation of cabotage policy in Indonesia has resulted in a greater number of locally flagged vessels in the country. The number of Indonesian-flagged ships rose by two-fold to 12,536 ships as of July 2013, compared with 6,041 ships in 2005, when the policy became applicable. This was revealed through data issued by the Indonesian National Shipowners' Association (INSA). The rise shows that the policy has benefited domestic players and increased investment in the country's shipping industry, INSA chairman Carmelita Hartoto, said. This has also promoted old players to expand their footprints and new players to enter the industry, Hartoto added. Hartoto also said that with a greater number of vessels capacity had grown more than three-fold to 17.89mn gross tonnes from 5.67mn gross tonnes in 2005.
Further Signs Of Automobile Industry Freight Demand: A new car terminal in Sumatra, Indonesia has been successfully inaugurated by Indonesia's state-owned port operator Pelabuhan Indonesia II (Pelindo II). The facility covers an area of 6,560 square feet at the port of Boom Baru and possesses the ability to take delivery of as many as 300 cars on a daily basis. The majority of the units are likely to be received on roll-on, roll-off vessels from the port of Tanjung Priok in Java.
Spread The Benefits Of Growth With Short Shipping Routes: The Indonesian government has outlined the requirement for shorter shipping routes, served by a fleet of around 1,000 smaller vessels, in order to ensure the country's economic growth. According to the Chamber of Commerce and Industry (Kadin), such a set-up would ensure that Indonesia's economic development benefit each of the islands in the archipelago. Government ministers have acknowledged that economic growth has often been confined to large cities.
Key Risks To Outlook
The main downside risk to our ports and shipping sector continues to be the possibility of renewed weakness in global credit markets, which might force a further tightening of interest rates at home. We believe Indonesia is particularly exposed to such a scenario. The authorities have relatively little room to manoeuvre in the face of tighter global credit conditions; this is because of the combination of persistent inflationary pressure at home and the weakness of the external accounts due to lower commodity earnings. To this must also be added a moderate rise in political risk as the 2014 elections draw closer.
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