Asian News - Indonesia: Risks to 2016 economic growth seen from China, US and domestic politics
Source: Asia Insurance Review | Jan 2016
China’s economic slowdown, US monetary tightening and ineffective domestic policy implementation are all seen as material threats to Indonesia’s growth this year, says Moody’s Investors Service.
According to 69% of the investors, intermediaries and regulators polled by the international rating agency during its “Inside ASEAN – Spotlight in Indonesia” event in Jakarta last month, Indonesia’s real GDP will expand by just 4%-5% in 2016, suggesting that an imminent growth revival is unlikely. Moody’s is forecasting real GDP growth of 4.7% in 2016, the same pace of expansion expected for last year.
The risks to growth are broad-based, with 36% of the audience stating that domestic politics and ineffective policy implementation constituted the largest risk to the country’s macroeconomic profile, followed by China’s growth slowdown and the impact on commodity prices (31%), and rupiah depreciation triggered by US Federal Reserve monetary tightening (31%).
Property developers and oil and gas companies are considered the most exposed to further rupiah depreciation. The sub-sectors considered most attractive were transport and conventional power. An increased pipeline of creditworthy projects is necessary for greater institutional investment in Indonesia’s infrastructure sector. Over 70% of the audience believed that other factors – ranging from credit enhancement to government support – were also important for infrastructure investment to take off.
Recent stimulus packages, meanwhile, meant to attract investment by easing supply-side constraints, and featured steps to reduce red tape and streamline licensing and land acquisition for infrastructure projects should help stimulate the economy over time.