The Standard Chartered Bank expects Indonesia's economy to expand 5.8 percent in 2014, followed by a 6 percentage growth in 2015 as an improving global economy has a positive effect on emerging economies, including Indonesia. The world economy is estimated to grow between 3.2 and 3.5 percent this year and expected to accelerate to 3.8 percent in 2015. David Mann, the regional Head of Research at the Standard Chartered Bank in Asia, said that Indonesia's economic performance in 2013 was negatively influenced by external factors.
Indonesia's official GDP growth figure for 2013 still needs to be released but it is expected that the outcome will be between 5.7 and 5.8 percent. Despite the global slowdown in recent years, Indonesia's economy is still able to post growth of over 5 percent. According to Mann, this indicates a strong economic fundament, and with a positive outlook for global economic growth ahead, he expects that Indonesia's economic expansion will accelerate due to improving exports in Southeast Asia's largest economy.
Mann further stated that Indonesia contains good economic potential due to the country's large and young population in combination with a rapidly expanding middle class, thus giving rise to a huge consumer force. Indonesia now has more than 240 million people, of which about 75 million are categorized as belonging to the country's middle class. Amid solid macroeconomic growth about seven million people per year are added to this middle class group. According to research firms the Boston Consulting Group (BCG) and McKinsey, the country's middle class will grow to between 130 and 140 million people by the period 2020 to 2030.
However, infrastructure and the general quality of regulations will need to be improved in order to maximize this growth potential. The lack of quality and quantity of infrastructure causes Indonesia's logistic costs to rise and thus hollows investors' confidence.
Fauzi Ichsan, Managing Director and Senior Economist at Standard Chartered Bank, agrees that Indonesia's economic expansion in 2014 will be approximately 5.8 percent. One important factor that blocks Indonesia from growing at a faster pace, according to him, is America's shale gas policy. This new policy leads to the closing of many coal-fired power stations in the USA and thus will curtail the global coal price. Indonesia, one of the world's largest coal exporters, will feel this impact.
The legislative and presidential elections, on the other hand, can provide an extra 0.25 percentage growth to total GDP growth in 2014. The legislative election is scheduled for 9 April 2014, while the presidential election will be held on 9 July 2014.