Following a year of economic instability in 2018, Indonesia’s market economy must still face unresolved problems in 2019. The country ended the year well, as the economy managed to grow fairly strongly in the fourth quarter, boosted by healthy consumption and smart investments. The tourism sector performed greatly, Asian Games provided needed bolstering for domestic spending, and in late December, the government managed to sign an agreement with Freeport-McMoRan over the majority stake of the Grasberg copper mine in East Papua. Predictions from experts around the world are positive, with the predicted growth of Indonesia’s GDP in for this year to be above 5%.
Nevertheless, in 2019, Indonesia’s economy as a whole is expected to encounter with local and global issues that has the potential to weaken the market and the value of Rupiah. The Federal Reserves signaled that it would raise rates to 3 percent in 2019, potentially prompting investors to pull out capital from Indonesia’s still emerging market. Furthermore, the ongoing trade conflict between Indonesia’s two largest trading partners, the US and China has begun to take a heavy toll in emerging economies, Indonesia being one of them.
From a political standpoint, the upcoming general election to select the next executive and legislative government is basked in uncertainties, making foreign investors unsure as to what steps will be taken by Indonesia economically in the next few years. As investors usually adopt a wait and see approach, international investing may slowly decline during this year. For this reason, the government must rationally rely on domestic spending and household per capita consumption. Without further stimulus, however, the reliance on domestic economy can prove disastrous.
Sources:
OECD
GBG Indonesia
World Bank
What would you like to learn about next week?
Comment, like, and share!