Indonesian economy to expand at faster pace in 2018 and 2019, inflation to reach 3.9 pct in 2017 – DBS Bank

Indonesia’s economic growth is expected to accelerate at a more rapid rate in 2018 and 2019, owing to favorable domestic tailwinds and possibly positive external factors, stated DBS Bank in a research report. The country has one of the most robust fundamentals in the region. Indonesia’s public debt is below 30 percent of the GDP, while inflation has been moderate at about 4 percent in recent years.

According to DBS Bank, the Indonesian economy might grow 5.3 percent and 5.4 percent in 2018 and 2019, respectively, an acceleration from the estimated 5.1 percent growth in 2017. Net exports are expected to contribute positively to the overall GDP growth, owing to the stronger prices of commodity. Meanwhile, investment growth is likely to carry on with gradual rebound, whereas consumption growth is expected to remain stable at 5 percent.

“We forecast CPI inflation to hit 4.0 percent and 4.5 percent in 2018 and 2019, respectively, up from our forecast of 3.9 percent for 2017”, stated DBS Bank.

So far in the second half of this year, the headline inflation has averaged 3.8 percent; lower than the second quarter’s average rate of 4.2 percent. During the year, food inflation has continued to slowdown. Inflation in the volatile food component had come in in a record-low of 0.8 percent in October, pulling down the overall CPI, in spite of inflation remaining around 5 percent in transport/communications and housing/utilities components of the CPI.

Meanwhile, Bank Indonesia is likely to begin raising rates again in the fourth quarter of 2018, bringing the policy rate back to 5 percent by mid-2019, added DBS Bank.

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