Finance Minister of Indonesia, Chatib Basri, expects the Indonesian economy to grow 5.3 percent (year-on-year, yoy) in the second quarter of 2014 because of improved household consumption supported by the legislative and presidential elections in 2014. Meanwhile, Indonesian exports are also expected to have improved slightly from its performance in the first quarter of the year due to improved economic conditions in Europe. However, demand from China and Japan remained sluggish. In Q1-2014, GDP growth slowed to 5.21 percent (yoy).
Improved performance of the country’s exports is evidenced by the trade surplus posted in May 2014 at USD $69.9 million (after recording a disappointing 1.96 billion trade deficit in the previous month). However, Indonesia is affected by a decline in demand for mining commodities from China, the world’s second-largest economy, in 2014.
The Indonesian government targets economic growth of around 5.5 percent in 2014. Since 2011, the economy has been slowing. Last year, economic growth declined to 5.78 percent.
Indonesia's Quarterly GDP Growth 2009–2014 (annual % change):
|Year|| Quarter I
||Quarter II||Quarter III||Quarter IV|
Source: Statistics Indonesia (BPS)
Gross Domestic Product of Indonesia 2006-2013:
(in billion USD)
(annual percent change)
|GDP per Capita
Sources: World Bank, International Monetary Fund (IMF) and Statistics Indonesia (BPS)
Senior Economist at Standard Chartered Bank Fauzi Ichsan said that Indonesia has to face four challenges in 2014: the current account deficit, slowing Chinese economic growth, political risks due to the presidential election, and geopolitical troubles in Iraq (causing higher global oil prices, a burden for countries that import oil, such as Indonesia). The Standard Chartered Bank expects Indonesian GDP to expand 5.5 percent in 2014 (similar to the government’s outlook), supported by ever-increasing household consumption (which accounted for about 55 percent of economic growth in 2013).
Meanwhile, Citi Research Economist Helmi Arman said that it will be difficult for Indonesia to record +5 percentage point growth in the years ahead if no structural reforms are implemented. The current account deficit, at about 2 percent of GDP in Q1-2014, is particularly inflicted by expensive oil imports to meet ever increasing subsidized fuel demand (Indonesian car sales have hit record highs in recent years).