FxWirePro: Global growth bottlenecks seen to weigh on Indonesia’s full-year economic performance

Indonesia’s full-year economic performance is likely to be hurdled by the ongoing global growth bottlenecks amid an environment of political uncertainties, which in turn is affecting global growth expectations.

This is despite an expansion in Indonesia’s Q4 2018 gross domestic product (GDP), compared to the pace seen in the third quarter of the same year. On a yearly basis also, the country managed to retain a third consecutive year of faster growth.

Indonesia’s economic growth widened by 5.18 percent in Q4, barely changed from the 5.17 percent seen in the prior quarter, while registering 5.17 percent y/y.

The healthy growth figures were led by a pick-up in consumption, investment and government spending. While both exports as well as imports witnessed a slowdown, improvement in inventories pushed the overall numbers.

"Meanwhile, policy measures aimed at reining in the current account deficit, including the central bank’s 175bps worth of rate hikes since last May, pose headwinds to domestic demand. Our forecast is for growth to come in at the lower bound of the central bank’s projection of 5.0-5.4," ANZ Research commented in its latest report.

Lastly, Bank Indonesia (BI) will likely refrain from adopting a rate hike at its monetary policy meeting later this month, given the strength in the Rupiah, subdued price pressures and weak economic growth outlook.