Indonesia Economic Outlook:
Prospect For A Modest Pick-Up In Economic Growth
Prospect For A Modest Pick-Up In Economic Growth
Despite
rising global uncertainties arising from Donald Trump’s victory inthe US
presidential elections, we expect the Indonesian economy to grow by 5.3% in
2017 (higher than our estimate of 5.1% in 2016), on account of:
1. A large domestic economy,
with domestic demand a key driver of growth;
2. Higher State Budget for
infrastructure projects;
3. Resilient household
consumption;
4. A more stable to modest
pick-up in primary commodity prices.
¨ Resilient
domestic demand to underpin growth in 2017.We expect Indonesia’s
domestic demand to pickup pace to 5.3% in 2017, from an estimated +4.9% in
2016, largely driven by:
i. A gradual pick-up in
private investment on the back of a recovery in commodity prices and lower
interest rates;
ii. Higher public
infrastructure spending;
iii. Resilient household
consumption due to moderate inflation and higher rural household income; but
iv. Offset by a slight
downtick in total government expenditure.
¨ Recovery
in the external sector. Real exports are likely to grow by +1.1% in
2017, from -1.8% in 2016, due to:
i. Relaxation of the export
ban on iron ore;
ii. A more stable to a modest
pick-up in primary commodity prices;
iii. Gradual improvement in
world merchandise trade volume.
¨ Ongoing
fiscal consolidation. We anticipate the Budget deficit to widen slightly to 2.8% of
GDP in 2017, from -2.7% in 2016, on the back of:
i. Modest revenue collection
after the implementation of tax amnesty;
ii. Various fiscal incentives
that may erode revenue.
¨ Slight
deterioration in current account deficit, widening to 2.3% of GDP for
2017, from -2.2% in 2016:
i. A pick-up in fixed
investment and imports; but
ii. Mitigated by higher
commodity prices
¨ Manageable
inflation and room for policy easing, with the headline inflation
rate to remain manageable at 3.8%,and the key policy rate likely to be cut by
25bps in 2017 amid:
i. A planned electricity
tariff hike;
ii. Modest pick-up in volatile
food prices; although
iii. Currency weakness could
delayany key policy rate cut.
Kindly click the following link for the full report: Prospect For A Modest Pick-Up In Economic Growth
Rizki Fajar
Vice President
Economist
PT. RHB Securities
Indonesia
