News: Why is Indonesia’s Q3 GDP losing momentum?

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Why is Indonesia’s Q3 GDP losing momentum?

With exports slowing down, does Indonesia’s Q3 GDP foretell tougher times ahead?
Why is Indonesia’s Q3 GDP losing momentum?

With the struggle continuing in outflows from its financial markets, Indonesia seems to be losing its GDP momentum that it had picked up last quarter. While the Indonesian market saw its gross domestic product (GDP) grow 5.17 per cent in the July-September quarter from the year before, the April-June quarter has had the fastest pace since 2013.

Andry Asmoro, Bank Mandiri's economist, stated that, "The global challenge is still huge and prioritising stability over growth remains relevant in the current environment”. He added that the central bank's monetary position were not likely to be affected by the third quarter GDP figures.

With the United States versus China trade war looming large, most of the Southeast Asian region is expected to feel the brunt. That said, Indonesia, not yet being too closely integrated with the global production supply chain, is predicted to be among the nations that would be affected the least. The rupiah, however, could stoop to its lowest strength in 20 years because of the pressure mounting on the country’s economy due to the depletions from the bond and stock markets.

 

While analysts were of the opinion that Bank Indonesia's (BI) higher loaning costs could lead to sluggish medium-term consumption, prior to the release of the GDP data, BI officials said that there need not be any correlation between their rate hikes and the Q3 numbers. What could further stagger the growth is the stance of the government which seems to have put a halt on infrastructure projects and increased The government has also delayed infrastructure projects and raised the cost of a vast variety of consumer goods.

While the government predicts growth at 5.3 per cent for next year, the projection might falter owing to the current scenario in the market. Moreover, for this year, while the official growth target is 5.4 per cent, Finance Minister, Mulyani Indrawati stated in the parliament last month that the numbers were likely to be around 5.14 per cent.

Indonesia is part of the many countries today that are trying to strike the right balance between growth and stability in the midst of volatility and economic disruption. For emerging markets that are yet to reach a certain level of maturity, the way ahead still seems long and riddled with uncertainty.

 

Topics: Global Perspective, Entrepreneurship

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