Country Economic Forecasts > Indonesia

Bank Indonesia cut the policy rate for a third consecutive month in March; the move was facilitated by low inflationary pressures and calm financial markets. We forecast inflation to remain with the target band of 3-5% through the year, while, in recent months, external uncertainties have eased. Against this backdrop, we expect Bank Indonesia to cut the policy rate by another 25bp, bringing it down to 6.5% during Q2 2016.We maintain our annual GDP growth forecasts at 5.1% for 2016 and 5.5% for 2017. Domestic economic growth should be supported by higher infrastructure spending and easier monetary conditions. However, there are risks to the growth outlook from the ongoing slowdown in China and the possibility that weakness in the external sector spills over into the domestic economy.