Economy of Indonesia; GDP Growth Slowed to 5.02% in 2019
As expected, Indonesia’s full-year 2019 economic growth came in well below the central government’s 5.3 percent year-on-year (y/y) growth target. Based on the data that were released by Statistics Indonesia (Badan Pusat Statistik, BPS) in early February 2020, the Indonesian economy expanded at a pace of 5.02 percent (y/y) in 2019.
Indonesia's economic growth has remained (stubbornly) close to the 5 percent (y/y) growth level; a level that is considered not high enough for the country to avoid the middle income trap. Indonesia’s 2019 gross domestic product (GDP) growth figure was also slightly below Indonesia Investments’ (revised) growth projection of 5.05 percent (y/y).
A consequence of the 5.02 percent (y/y) growth pace of Indonesia in 2019 is that it effectively ended the country’s three-year period of (slowly) accelerating economic expansion. After touching a low of 4.88 percent (y/y) in 2015, Indonesia’s economic growth managed to accelerate modestly in the 2015-2018 period. Now, however, Indonesia will need to face at least two years of economic slowdown (because growth is bound to ease further in 2020 due to the novel coronavirus outbreak).
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This article discusses:
• What has dragged down Indonesia's economic growth in 2019? Subdued global growth (led by China) and Indonesia's 'political year'. Meanwhile, certain changes in the US Federal Reserve's monetary policy also bring challenges.
• The new normal; is Indonesia's economic growth to be around 5 percent (y/y) structurally in the period ahead? What does the end of the 2000s commodities boom has to do with this new normal? It is interesting that swings in Indonesia's GDP growth show a very similar pattern to swings in global commodity prices!
• To escape the new normal it is important for Indonesia to impose structural reforms. The government now seems to bet on the two omnibus bills to strengthen Indonesia's business and investment environments structurally.
• Taking a look at President Joko Widodo's first 100 days in office in his second term.
This article is part of the February 2020 update. To purchase the report, please send an email to info@indonesia-investments.com or a WA text message to +62(0)8788.410.6944 for further information.
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