Economy of Indonesia: Government Targets GDP Growth of 5.8% in 2015

Indonesian Government's Macroeconomic Assumptions:

	State Budget     Draft 2015	State Budget       2014	Revision State    Budget 2014	Realization        2013
GDP Growth annual percent change	5.5 - 5.8	6.0	5.5	5.8
Inflation annual percent change	3 - 5	5.5	5.3	8.4
Exchange Rate IDR/USD	11,500-12,000	10,500	11,600	10,451
Treasury Bills Interest Rate 3-month, percent	6.0 - 6.5	5.5	6.0	4.5
Crude Oil USD $ per barrel	95 - 110	105	105	105.7
Oil Lifting thousand barrels per day	900 - 950	870	818	825
Natural Gas Lifting barrel of oil equivalent/day	1,225 - 1,250	1,240	1,224	1,215

^{Source: Investor Daily}

However, despite the improved outlook, risks remain due to the Federal Reserve’s tapering off policy (the bond- buying program/quantitative easing may end in the fall of 2014) as well as looming US interest rate hikes in 2015. This is expected to lead capital outflows from emerging markets, including Indonesia.

Other concerns for global economic expansion are sluggish growth in the Eurozone, higher sales tax in Japan (reducing Japanese consumers’ purchasing power), China’s slowing economy (resulting in the government’s focus on boosting domestic consumption), as well as India’s current account troubles.

To make accelerated economic growth possible, Indonesia’s next president (a race between Joko Widodo and Prabowo Subianto) should raise prices of subsidized fuels and attract a higher amount of foreign investment (although both candidates have uttered protectionist speech ahead of the election on 9 July 2014). Without these two matters, it will be difficult to obtain a healthy financial balance sheet (particularly structural current account troubles are a concern) or aim for +6 percentage point growth in the years ahead.

Since 2011, Indonesia’s economic growth has been slowing:

Indonesia's Quarterly GDP Growth 2009–2014 (annual % change):

Year	Quarter I	Quarter II	Quarter III	Quarter IV
2014	5.21
2013	6.03	5.89	5.62	5.78
2012	6.29	6.36	6.16	6.11
2011	6.45	6.52	6.49	6.50
2010	5.99	6.29	5.81	6.81
2009	4.60	4.37	4.31	4.58

^{Source: Statistics Indonesia (BPS)}

Gross Domestic Product of Indonesia 2006-2013:

	2006	2007	2008	2009	2010	2011	2012	2013
GDP (in billion USD)	285.9	364.6	432.1	510.2	539.4	706.6	846.8	878.0
GDP (annual percent change)	5.5	6.3	6.1	4.6	6.1	6.5	6.2	5.8
GDP per Capita (in USD)	1,643	1,923	2,244	2,345	3,010	3,540	3,592	-

^{Sources: World Bank, International Monetary Fund (IMF) and Statistics Indonesia (BPS)}

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