1. Market Research
  2. > Energy & Environment
  3. > Energy
  4. > Oil and Gas Energy Market Trends
  5. > Indonesia Country Risk Report Q4 2016

Indonesia Country Risk Report Q4 2016

  • July 2016
  • -
  • Business Monitor International
  • -
  • 45 pages

Core Views

Indonesia's economic activity will pick up pace (from the 4.9% y-oyfigure registered in Q116) over the coming quarters, supportedby strong investment and public infrastructure drive (we forecastIndonesia's real GDP growth to come in at 5.2% in 2016). BankIndonesia (BI)'s accommodative monetary policy stance will alsohelp to bolster investor and consumer confidence. That said, theweakening of the government's fiscal position poses downside riskto our rather constructive view.Despite the proposed amendments to the 2016 State Budget, wemaintain our forecast for Indonesia's fiscal deficit to come in at-2.7% of GDP, but note that risks are weighted to the downside.Importantly, the government has a history of missing its revenuetargets, and the continuous delay in the proposed tax amnesty billas well as the subdued oil price environment will continue to weighon the government's top line. While the government has reaffirmedits commitment to its ambitious infrastructure development targets,expenditure cuts are on the cards, and this could potentially undermineIndonesia's short-term economic growth prospects.Indonesian President Joko Widodo has managed to consolidatehis political position and now enjoys an outright majority in parliament.

This has helped him score two major political victories in June(particularly the passage of the tax amnesty bill on June 28), and webelieve that policy enactment will continue to improve hereafter.We maintain our expectations for the Indonesian rupiah to weakenin spot terms towards IDR13,600/USD by end-2016, as uncertaintyin the global financial markets, yuan depreciation and a dovish BIwill weigh on the unit. The downtrend is likely be sustained intothe longer term due to Indonesia's high income account deficit andhigher inflation relative to the US, but rupiah weakness will likely becapped as the US Fed is unlikely to pursue aggressive rate hikesbetween now and 2017.We believe that the Trans-Pacific Partnership (TPP) membershipwould benefit Indonesia over the medium-to-long term as it wouldbroaden market access for Indonesian goods, improve market efficiencyby eliminating weak enterprises, encourage more efficientallocation of resources and promote innovation. However, as Indonesia'smanufacturing sector currently stands, it is not yet readyto compete against other TPP nations, and joining the TPP couldprovide a shock to the still-developing industry. Indonesia would likelybe better placed to join the TPP after it has improved its industrialcompetitiveness and scaled up its export-oriented manufacturingsector.Major Forecast ChangesWe believe that BI will lower its benchmark interest rate again byan additional 25bps over the coming months as weak governmentspending could weigh on Indonesia's fledgling growth recovery.The central bank maintained a dovish tone in its official statement,emphasising the need for additional stimulus measures. A fairlystable rupiah and moderate inflation will provide room for additionaleasing.

Table Of Contents

Indonesia Country Risk Report Q4 2016
Executive Summary. 5
Core Views5
Major Forecast Changes..5
Key Risks..5
Chapter 1: Economic Outlook 7
SWOT Analysis.. 7
BMI Economic Risk Index 7
Economic Growth Outlook. 8
Strong Government Initiatives To Bolster Full-Year Growth8
Indonesia's economic activity will pick up pace (from the 4.9% y-o-y figure registered in Q116) over the coming quarters, supported
by strong investment and public infrastructure drive (we forecast Indonesia's real GDP growth to come in at 5.2% in 2016). BI's
accommodative monetary policy stance will also help to bolster investor and consumer confidence. That said, the weakening of the
government's fiscal position poses downside risk to our rather constructive view.
TABLE: REAL GDP GROWTH BY EXPENDITURE..8
GDP By Expenditure Outlook 9
TABLE: GDP GROWTH FORECASTS.9
TABLE: PRIVATE CONSUMPTION FORECASTS.. 10
TABLE: GOVERNMENT CONSUMPTION FORECASTS 10
TABLE: FIXED INVESTMENT FORECASTS. 10
TABLE: NET EXPORTS FORECASTS.. 10
Fiscal Policy And Public Debt Outlook 11
Growth Recovery At Risk From Fiscal Downgrade.11
Despite the proposed amendments to the 2016 State Budget, we maintain our forecast for Indonesia's fiscal deficit to come in at -2.7
%of GDP, but note that risks are weighted to the downside. Importantly, the government has a history of missing its revenue targets,
and the continuous delay in the proposed tax amnesty bill as well as the subdued oil price environment will continue to weigh on the
government's top line.
TABLE: KEY BUDGET INDICATORS. 11
Structural Fiscal Position. 12
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES.. 13
TABLE: FISCAL AND PUBLIC DEBT FORECASTS.. 13
External Trade And Investment Outlook. 14
Not Yet Ready For The TPP.14
We believe that the TPP membership would benefit Indonesia over the medium-to-long term as it would broaden market access
for Indonesian goods, improve market efficiency by eliminating weak enterprises and promote innovation. However, as Indonesia's
manufacturing sector currently stands, it is not yet ready to compete against other TPP nations and joining the TPP could provide
a shock to the still-developing industry. Indonesia would likely be better placed to join the TPP after it has improved its industrial
competitiveness and scaled up its export-oriented manufacturing sector.
TABLE: EXISTING AND PLANNED FTAS.. 14
Outlook On External Position. 16
TABLE: MAIN EXPORT AND IMPORT PARTNERS.. 16
TABLE: MAIN EXPORTS AND IMPORTS 17
TABLE: CAPITAL and FINANCIAL ACCOUNT BALANCE.. 17
TABLE: CURRENT ACCOUNT BALANCE FORECASTS 17
Monetary Policy.. 18
BI To Step Up Stimulus Measures Over Coming Months.18
We believe that BI will lower its benchmark interest rate again by an additional 25bps over the coming months as weak government
spending could weigh on Indonesia's fledgling growth recovery. The central bank maintained a dovish tone in its official statement,
emphasising the need for additional stimulus measures. A fairly stable rupiah and moderate inflation will provide room for additional
easing.
TABLE: INTEREST RATE STRUCTURE.. 18
Monetary Policy Framework 19
TABLE: MONETARY POLICY FORECASTS 19
Currency Forecast. 20
Lower Fed Hike Expectations To Temper Rupiah's Depreciatory Bias..20
We maintain our expectations for the Indonesian rupiah to weaken in spot terms towards IDR13,600/USD by end-2016 as uncertainty
in the global financial markets, yuan depreciation and a dovish BI will weigh on the unit. The downtrend is likely be sustained into the
longer term due to Indonesia's high income account deficit and higher inflation relative to the US, but rupiah weakness will likely be
capped as the US Fed is unlikely to pursue aggressive rate hikes between now and 2017.
Chapter 2: 10-Year Forecast. 23
TABLE: BMI CURRENCY FORECAST.. 20
The Indonesian Economy To 2025. 23
A Bullish Long-Term Growth Story23
Indonesia's large domestic demand base and exposure to commodities are two key factors driving our bullish growth outlook for the
next decade. That said, government policy reform will be crucial in determining if the country can reach its real growth potential.
TABLE: LONG-TERM MACROECONOMIC FORECASTS. 23
Chapter 3: Political Outlook. 25
SWOT Analysis 25
BMI Political Risk Index. 25
Consolidation Of Political Position A Positive For Policy Enactment.26
Indonesian President Joko Widodo has managed to consolidate his political position and now enjoys an outright majority in parliament.
This has helped him score two major political victories in June (particularly the passage of the tax amnesty bill on June 28), and we
believe that policy enactment will continue to improve hereafter.
TABLE: POLITICAL OVERVIEW . 26
TABLE: SEATS AT HOUSE OF REPRESENTATIVES. 27
TABLE: TAX AMNESTY BILL: KEY TAKEAWAYS.. 27
TABLE: ECONOMIC STIMULUS PACKAGE - KEY TAKEAWAYS 27
Long-Term Political Outlook.. 28
Outlook Improved, But Uncertainty Lingers.28
Although Indonesia has returned to relative orderliness since the post-Suharto chaos of the late 1990s and early 2000s, the country
faces multiple challenges and threats to its stability that could flare up again if the opposition to president Joko 'Jokowi' Widodo proves
excessively obstructionist. As such, investors will continue to view Indonesia as one of Asia's riskier destinations.
Chapter 4: Operational Risk. 31
SWOT Analysis 31
Operational Risk Index.. 31
Operational Risk. 32
TABLE: OPERATIONAL RISK 32
Market Size And Utilities Analysis.. 33
TABLE: ASIA - MARKET SIZE AND UTILITIES RISK.. 34
Labour Costs 37
TABLE: LABOUR REGULATIONS GOVERNING FLEXIBILITY OF WORKFORCE.. 38
Chapter 5: BMI Global Macro Outlook 41
Global Macro Outlook. 41
Brexit Risk Casts A Long Shadow..41
TABLE: GLOBAL ASSUMPTIONS.. 41
TABLE: DEVELOPED STATES, REAL GDP GROWTH, % 42
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %.. 43
TABLE: MACROECONOMIC DATA and FORECASTS. 45

View This Report »

Get Industry Insights. Simply.

  • Latest reports & slideshows with insights from top research analysts
  • 24 Million searchable statistics with tables, figures & datasets
  • More than 10,000 trusted sources
24/7 Customer Support

Talk to Veronica

+1 718 514 2762

Purchase Reports From Reputable Market Research Publishers
Crude Oil Flow Improvers Market by Type, Application, Supply Mode - Global Forecast to 2021

Crude Oil Flow Improvers Market by Type, Application, Supply Mode - Global Forecast to 2021

  • $ 12000
  • Industry report
  • September 2016
  • by MarketsandMarkets

“Rise in crude oil production worldwide drives the COFI market” The global market size of COFI is estimated to reach USD 1.73 billion by 2021 from 1.32 billion in 2016, at a CAGR of 5.5%. Excessive ...

Filter Bags Market - Global Industry, Size, Share, Growth, Trends and Forecast 2016 - 2024

Filter Bags Market - Global Industry, Size, Share, Growth, Trends and Forecast 2016 - 2024

  • $ 7000
  • Industry report
  • September 2016
  • by Transparency Market Research

The filter bags market report provides an in-depth analysis of the global filter bag market for the period 2014 – 2024, wherein 2015 is the base year and the years from 2016 to 2024 is the forecast period. ...


ref:plp2016

Reportlinker.com © Copyright 2016. All rights reserved.

ReportLinker simplifies how Analysts and Decision Makers get industry data for their business.