Will Donald Trump's Protectionist Policies Impact on Indonesia?
Frederic Neumann, Managing Director and Co-Head of Asian Economics Research at HSBC, says Indonesia is well positioned to feel limited impact only of US president-elect Donald Trump's (looming) protectionist policies as Indonesia's export performance contributes a mere 21.1 percent to the nation's gross domestic product (GDP). It is in fact domestic consumption that forms the backbone of the Indonesian macroeconomy, accounting for about 56 percent of GDP, and thus provides a buffer against global turmoil.
The strong consumer force in Indonesia (a 255 million population that is equipped with an expanding middle class) and rising government spending in combination with the country's low dependency on foreign trade is what makes Indonesia well-positioned to face the protectionist measures that are expected to be implemented under the Trump administration. Neumann added that the subdued debt level is also something that makes Indonesia a strong emerging market economy. He also mentioned that India shares these features with Indonesia.
Meanwhile, economic growth in Indonesia is expected to continue accelerating. After a five-year slowdown in the 2011-2015 period, Indonesia's GDP growth is estimated to have accelerated to a growth pace of 5.0 percent (y/y) in 2016, from 4.8 percent (y/y) in the preceding year. In 2017 accelerating growth is expected to continue in Southeast Asia's largest economy. This should imply that bank credit and domestic consumption (boosted by improving purchasing power) should rise accordingly.
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