Indonesia likely to cut interest rate around mid year

Indonesian real GDP expanded by an estimated 4.8% y/y in 2015. The main key drivers behind the lower growth were prolonged delays in government spending, sluggish private investment and the impact of weak global markets. Indonesia also recorded a current account deficit equivalent to 2.2% of GDP in the third quarter of 2015. Moreover, manufacturing activity remained in negative territory and exports were contracted in the previous year. 

According to the fresh estimates from Scotia bank, "Inflation will likely hover near 5% y/y in 2016 -17, as a gradual recovery in commodity prices and a weakening rupiah maintain some pressure on prices. Moreover, it expects another 25 bps interest rate cut around mid-year. In addition economic growth will accelerate slightly to an average of 5.2% in 2016-17."