Indonesia Economic Outlook:
Stronger Growth As Exports & Government Spending Recover
Stronger Growth As Exports & Government Spending Recover
As
domestic demand and external activities recover, we expect the Indonesian
economy to grow by 5.2% in 2017 (higher than 5% in 2016), on account of:
1. Rebound in government spending as
revenue collection improves;
2. Faster State Budget disbursements for
infrastructure projects;
3. Resilient household consumption;
4. Lower cost of borrowings;
5. Pick-up in primary commodity prices.
¨ Resilient domestic demand to underpin growth
in 2017. We
expect Indonesia’s domestic demand to pick up pace to 5.3% in 2017 (+4.4% in
2016), driven by:
i. 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 and higher rural household income;
iv. Rebound in total
government expenditure.
¨ Recovery in the external sector. Real exports are
likely to grow by +1.1% in 2017, from -1.7% in 2016, due to:
i. Relaxation of the
export ban on mineral ore;
ii. Pick-up in primary
commodity prices;
iii. Gradual improvement
in world merchandise trade volume.
¨ Conservative fiscal deficit. We anticipate the
Budget deficit to widen slightly to 2.6% of GDP in 2017, from -2.5% in 2016, on
the back of:
i. Modest tax collection
in the last phase of tax amnesty programme;
ii. Various fiscal
incentives that may erode revenue;
iii. Offset by an uptick
in commodities-related tax and non-tax revenue.
¨ Slight deterioration in current account
deficit,
widening to 2% of GDP for 2017, from -1.8% in 2016, on:
i. Pick-up in fixed
investment and imports of consumption;
ii. Mitigated by higher
commodity prices.
¨ Manageable inflation and room for neutral
monetary policy,
with the headline inflation rate to remain manageable at 4.2%, and the key
policy rate likely to be maintained in 2017.
Kindly click the following link for the full report: Stronger Growth As Exports & Government Spending Recover
Best regards,
Rizki Fajar
Vice President
Economist
PT. RHB Securities
Indonesia
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