Indonesia's Q2 to be softer

Indonesia's High frequency indicators suggest limited pickup in activity. Loan growth continues to ease, led by a slowdown in investment and working capital loans.

Weak exports will also continue to weigh on growth. However, household loan growth has turned higher since March, suggesting resilience in private consumption. GDP growth is seen at 5.1% in 2015, largely unchanged from the 5% last year. 

A gradual investment recovery is still expected this year, in part due to a low base effect and as the government jumpstarts infrastructure projects, particularly in the second half.

Second quarter GDP growth will likely be less than 5% yoy, following the modest 4.7% growth in 1Q, says Bank of America.

Extension of tax allowances  stipulated under a decree effective since early May may spur private and foreign investment. However, infrastructure and public investment is falling well short of targets, with only about 3% of funds disbursed in 1Q. 

Weak first quarter GDP will likely increase the pressure on the government to accelerate spending and progress on major projects.