JAKARTA. Indonesia will benefit from Asia’s emerging position as the new epicenter of the global economy, as long as Southeast Asia’s largest economy is able to resolve impending political and economic issues, analysts say.
According to DBS Bank economist Gundy Cahyadi, Indonesia is likely to post 5.9 percent economic growth next year as global economic power shifts from the US and Europe to Asia.
Gundy predicted investment growth would be higher in 2015, on the back of a recovering rupiah and a reduction in political tensions in the country. At the current rate, he predicted investments would grow by 10 to 12 percent.
“The market is averse to political uncertainty, so next year will automatically be better. [...] The rupiah is also more stable, although not yet at a decent level. If the current situation persists into next year, we believe that investments will improve,” Gundy said Thursday.
“If investments are disappointing next year, it will be hard to achieve the 5.9 percent mark.”
Gundy said, he had also taken into account the imminent 20 to 30 percent fuel price hike and an average inflation rate of 6.2 percent.
Gundy also said that next year’s outlook for global economic growth was better than this year, which DBS assumed would reach 5.8 percent. “We are capable of growing by 6.5 percent in the next five to ten years. So 5.8 percent is still below our full potential,” he said.
“This year was disappointing. America and Europe posted low growth, and Japan has yet to see any impact from Abenomics.”
In the past month, the rupiah and the Jakarta Composite Index (JCI) had among the worst performance in Asia, according to DBS.
Gundy said the Indonesia Stock Exchange was down some 4.6 percent up until Oct. 8, which was considered high compared to the average loss of 3 percent in the region.
Meanwhile, research and monitoring agency Katadata found that the new government could potentially face five big economic problems if the country’s long-winded political feud continued after president-elect Joko “Jokowi” Widodo was sworn into office on Oct. 20.
Katadata research director Heri Susanto said that Jokowi’s government would face further weakening of the rupiah and a declining Indonesian Composite Index (IHSG), a less-than-conducive business climate, faltering infrastructure projects, and slowing growth and rising unemployment, unless political elites from both sides of the axis could settle their differences and defuse the political time bomb. (Tama Salim)
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