ASEAN KEY DESTINATIONS
RI’s GDP to bounce back this year, says Standard Chartered
The Indonesian economy will bounce back in 2016 after bottoming out last year, according to experts at British lender Standard Chartered Bank.
Various economic indicators suggested that the economy had stabilized and was on its way toward recovery, Standard Chartered Bank Indonesia economist Aldian Taloputra argued in a research briefing on Monday.
He pointed to data on domestic automotive sales — both cars and motorcycles — that had improved, even though the figures were still in negative territory.
Total car sales reached 1.01 million units in 2015, compared to 1.21 million units in 2014, according to data from the Association of Indonesian Automotive Manufacturers (Gaikindo).
Meanwhile, statistics from the Indonesian Motorcycle Industry Association (AISI) revealed that total motorcycle sales stood at 6.48 million units last year from 7.87 million units recorded in 2014.
A similar bright spot was also recorded in total domestic cement consumption, with the Indonesian Cement Association reporting an annual increase of 0.9 percent to 60.44 million tons in 2015 from a year ago.
“Part of those improvements can be attributed to the government’s capital spending, especially on infrastructure, that accelerated approaching the end of the year, creating multiplier effects,” Aldian said.
There was a 45 percent increase in realized capital spending in 2015, compared to 2014, with a significant pickup in the second half.
Standard Chartered estimates that the government will remain a key player with its spending and will help the country achieve economic growth of 5.2 percent in 2016, an increase from the 4.7 percent growth rate estimated in 2015.
Growth will pick up again in 2017 to 5.4 percent as various key projects come into operation across the country.
Standard Chartered’s growth estimate for 2016 is a tad lower than the government’s own prediction of 5.3 percent.
The government itself has jacked up the infrastructure budget to Rp 313.5 trillion (US$22.64 billion) in 2016 from the Rp 290.3 trillion allocated in 2015.
Standard Chartered expects to see private investment gradually improve as the government implements its economic policy packages.
“Relatively stable inflows of FDI [foreign direct investment] suggest that Indonesia is still an attractive proposition amid the global slowdown,” Aldian said.
Data from the Investment Coordinating Board (BKPM) confirmed Indonesia’s attractiveness. Realized FDI rose to Rp 365.9 trillion last year from Rp 307 trillion in 2014.
Edward Lee, the lender’s regional head of research for Southeast Asia, said Indonesia was expected to improve its GDP along with most other Asian countries.
Similar to its peers in Southeast Asia, Indonesia will likely rely on its domestic engine for growth. Stable labor markets will be a source of support as well.
He lauded Bank Indonesia’s (BI) decision to remain cautious amid last year’s volatility. BI had, he argued, effectively guarded the Indonesian currency.
Standard Chartered predicts that BI will cut its key rate again in February and in the second quarter, 25 basis points each, to revive the economy.
By the end of the second quarter, the rate is predicted to hover at 6.75 percent from its current position of 7.25 percent.
Meanwhile, in regards to the slowing economy in China, Standard Chartered chief economist Marios Maratheftis said no significant threat appeared for its partners, including Indonesia.
“I am not pessimistic about China. Even if it is slowing down, it is still growing and getting bigger. So what it does to the world economy today is a multiple of what it used to add when it was growing at 15 percent,” he said.
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