Economy of Indonesia: Government Targets GDP Growth of 5.8% in 2015
The Indonesian government is optimistic that the country’s economic growth will accelerate to 5.8 percent (year-on-year) in 2015 from an expected growth pace of 5.5 percent in 2014. The key to next year’s improved gross domestic product (GDP) growth of Indonesia is the higher forecast for global economic growth. In 2015, the world economy is estimated to grow 3.9% (yoy), higher than the outlook for this year’s growth at 3.6 percent. As such, the government’s outlook is in line the central bank’s GDP growth forecast in the range of 5.4 to 5.8 percent.
Indonesian Government's Macroeconomic Assumptions:
| State Budget
| Revision State
annual percent change
|5.5 - 5.8||6.0||5.5||5.8|
annual percent change
|3 - 5||5.5||5.3||8.4|
|Treasury Bills Interest Rate
|6.0 - 6.5||5.5||6.0||4.5|
USD $ per barrel
|95 - 110||105||105||105.7|
thousand barrels per day
|900 - 950||870||818||825|
|Natural Gas Lifting
barrel of oil equivalent/day
|1,225 - 1,250||1,240||1,224||1,215|
Source: Investor Daily
However, despite the improved outlook, risks remain due to the Federal Reserve’s tapering off policy (the bond- buying program/quantitative easing may end in the fall of 2014) as well as looming US interest rate hikes in 2015. This is expected to lead capital outflows from emerging markets, including Indonesia.
Other concerns for global economic expansion are sluggish growth in the Eurozone, higher sales tax in Japan (reducing Japanese consumers’ purchasing power), China’s slowing economy (resulting in the government’s focus on boosting domestic consumption), as well as India’s current account troubles.
To make accelerated economic growth possible, Indonesia’s next president (a race between Joko Widodo and Prabowo Subianto) should raise prices of subsidized fuels and attract a higher amount of foreign investment (although both candidates have uttered protectionist speech ahead of the election on 9 July 2014). Without these two matters, it will be difficult to obtain a healthy financial balance sheet (particularly structural current account troubles are a concern) or aim for +6 percentage point growth in the years ahead.
Since 2011, Indonesia’s economic growth has been slowing:
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)
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