Indonesia Q4 GDP shows green shoots: Investment rises

February 24, 2018

JAKARTA - The Indonesian economy expanded by 5.2%YoY in Q4 2017 from 5.1% in Q3 2017 thanks to stronger investment. Public and private investment picked up due to an acceleration of infrastructure investment and reduction of funding costs. By sector, transport and storage continued its rebound in Q4.

On the other hand, says a note from the French banking group, Natixis, private consumption remained weak, growing only 5%YoY, reflecting weak labour market conditions and low pass-through of funding costs to consumer given limited access to credit.

 

Exports softened in December from the double-digit growth rates, but that said, a rebound of commodity prices and strong global demand should help with export expansion in 2018, the report says.

 

“Looking ahead, we expect growth to recover to 5.2% in 2018, a modest acceleration from 5.1% in 2017,” Natixis says. 

 

“Sluggish demand continues to drag down the economy as private consumption makes up more than half of the output. That said, the credit cycle bottomed and investment should recover as the Government steps up efforts in infrastructure investment in 2018 in an effort to shore up support for the upcoming presidential elections in 2019.

 

“While the fiscal deficit will remain limited as the Government keeps a lid on public debt, contingent liability will likely rise as the Government pushes for implementation of infrastructure projects, which means that State-owned enterprises will shoulder most of the costs.”

Natixis says Indonesia has accumulated substantial savings – its net international reserves position increased to US$132bn in January 2018, allowing it more space to absorb shocks to excessively currency volatility, should it choose to do so. www.natixis.com (ATI).