READ full country note (PDF)
Economic growth is projected to remain above 5% in 2019-20. Rising incomes will lift private consumption. Tighter financial conditions will weigh on firms’ investment but ongoing infrastructure investment will provide support. Slower growth in trading partners will be a drag on exports, but improvements in regulations and connectivity, along with greater price competitiveness from currency depreciation, should support gains in market share. Inflation is set to remain relatively subdued notwithstanding the rupiah depreciation and higher fuel prices. Higher import prices have widened the current account deficit.
Bank Indonesia has raised interest rates by 175 basis points since mid-May to contain capital outflows. Further pre-emptive tightening is projected as US interest rates rise. The budget deficit is set to narrow slightly. Reforms to improve the efficiency of spending, shift social assistance towards targeted transfers and further lower costs of doing business would support inclusive growth.
1. The Manufacturing Purchasing Managers Index is a survey-based leading indicator. An index above 50 indicates an overall increase and below 50 an overall decrease in economic activity.
Source: CEIC; Markit; and OECD Economic Outlook 104 database.
1. Excludes administered and volatile food prices.
Source: CEIC; Thomson Reuters; and OECD Economic Outlook 104 database.
Economic Survey of Indonesia (survey page)