Indonesia economy likely to slowdown due to weak domestic demand

Indonesia's GDP data for Q2 is scheduled to release on 5th August.
 
Indonesia's domestic demand, which remained fairly strong during 2014, is showing clear signs of deceleration during 2015. High frequency indicators, such as loan growth (both consumption and investment), vehicle sales, imports of raw materials and capital goods, all point toward weak consumption and investment demand. Car sales have contracted for the 12th straight month while growth in loans outstanding remains anaemic.

The economy, after having recorded the lowest ever growth rate (as per the new data set) of 4.71% yoy during Q1 2015, a mild uptick during Q2 2015 to 4.81% yoy is expected, says Societe Generale.

The government's desire to jumpstart the economy by spending a larger share of resources that could be saved due to lower oil prices has failed to materialise. Continued weakness in currency is partially to be blamed for savings being lower than what was envisaged, as a large part of the benefit of weak oil prices has been eroded by continued weakness in the currency. Not surprisingly, inventory built-up continues even as the PMI remains in contraction zone for the ninth straight month. Heavy dependence on commodities is taking its toll as commodity prices remain soft, with the Chinese slowdown adding further headwinds to growth, adds SocGen.