Country Economic Forecasts > Indonesia

Supported by expectations that the US Fed may delay the hike in its short-term interest rate, both the rupiah and the stock market rallied at the beginning of Q4. A number of recent government policy initiatives may also have helped sentiment in the financial markets.However, in our view, the rupiahs recovery is unlikely to be sustained. In the past, Indonesia has fallen short on implementing policies and structural reform. Furthermore, a still sizeable current account deficit will weigh on the rupiah. We believe that the exchange rate will fall back into a range of 14,000-15,000 per US$ in the coming months.Recent monthly activity data have been mixed but there are some indications that government spending on infrastructure may be picking up, while bank lending growth has accelerated. We maintain our 2015 annual GDP growth forecast at 4.8%.