Although real GDP growth in Indonesia has slowed consider- ably since its peak in ----, we believe that Indonesia has the potential to be a regional outperformer over the coming decade (contingent on successful reforms), with economic growth averaging around -.- per annum. Private Consumption: Private consumption accounts for -- of nominal GDP in Indonesia in ----. Over our forecast period of ---------, we expect private consumption as a share of GDP to decrease gradually to -- as more resources are being diverted to gross capital formation. That said, the consumer market in Indonesia will continue to grow strongly (real consumption growth forecast to average -.- per annum) over the medium- to-long term on the back of favourable demographic dynamics, rising levels of urbanisation, greater household leverage, and fast-rising GDP per capita. Government Consumption: Government consumption as a share of GDP stood at -.- in ----, and we expect the pro- portion to decline slightly to -.- over our forecast period (---------). ...Fixed Investment: Gross capital formation accounts for --.- of nominal GDP, and we expect this segment of the GDP to expand gradually over the medium term to --.- by ----, on the back of the government s focus on investment and infrastructure spending. Despite some hiccups over the near term, we believe that reform momentum will likely pick up over the coming years, which will likely improve the investment climate and spur more - Business Monitor International Ltd www.bmiresearch.com
...Indonesia s budget deficit as a share of GDP will likely deepen further to -.- in ----, from our forecast of -.- in ----, due to higher developmental expenditures and lower-than-projected revenue re- alisation. This could potentially exert upside pressure on Indonesia s sovereign bond yields over the coming quarters as the government will have to tap on the bond market to finance its revenue shortfall. ...Over the course of ----, weak economic growth momentum, external headwinds and diverging monetary policies will likely continue to undermine the rupiah. Although the pro-reform Jokowi administration has been actively trying to reduce bureaucratic red tape and boost investor confidence, political infighting due to vested interest and nationalistic sentiment among the political elites have hampered the progress and efficacy of these positive developments. This will likely act as a drag on the country s economic recovery over the coming year; as such, we maintain our forecast for Indonesia s economy to accelerate only moderately in ----, with a forecasted real GDP expansion of -.- . ...Although the pro-reform Jokowi administration has been actively trying to reduce bureaucratic red tape and boost investor confidence, political infighting due to vested interest and nationalistic sentiment among the political elites have hampered the progress and efficacy of these positive developments. This will likely act as a drag on the country s economic recovery over the coming year; as such, we maintain our forecast for Indonesia s economy to accelerate only moderately in ----, with a forecasted real GDP expansion of -.- .
...
