Indonesia Economic Quarterly, July 2012
The Indonesia economic quarterly reports on and synthesizes the past three months' key developments in Indonesia's economy. It places them in a longer-term and global context, and assesses the implications of these developments and other changes in policy for the outlook for Indonesia's economic and social welfare. The near-term global economic outlook is fragile and emerging economies, including Indonesia, again face the risk of a potential crisis that is not of their making. The growth outlook for Indonesia's major trading partners (MTP), at 3.3 percent in 2012, remains relatively weak as increased Euro zone uncertainty adds to the ongoing drags on global growth from budget cutting and deleveraging in developed economies, and capacity constraints in some developing economies. Recent international financial market turbulence looks set to continue in the near-term and, while this baseline scenario remains the most likely outcome, capital flows to emerging economies and sentiment are likely to remain volatile. Further enhancing crisis preparedness is therefore a policy priority for economies such as Indonesia but, at the same time, it is important to push ahead with reforms and investments which can support medium-term growth in what is likely to be a weaker global economic environment. Indonesia's gross domestic product (GDP) growth remained a solid 6.3 percent year-on-year in the first quarter of 2012, down slightly from an average of 6.5 percent in 2011. Seasonally-adjusted growth overall came down off the highs of the final quarter of 2011 but consumption growth held up well. However, investment growth dipped and, reflecting the relative weakness of external demand, net exports again were a drag on growth. Inflation, although picking up somewhat, has remained relatively low and price expectations came down with the reduced likelihood of a subsidized fuel price increase in 2012, as oil prices declined. In the event of a major freezing of international financial markets which contributes to a drop in trading partner growth. In a scenario in which such a crisis was accompanied, or indeed precipitated, a severe, prolonged global downturn encompassing the major emerging economies, growth in Indonesia could drop to 3.8 percent, with the impact of the slowdown felt more sharply in domestic activity as commodity price falls reduce incomes and investment. In the event of a severe crisis, it is possible that domestic consumer and business sentiment drops sharply which, combined with any potential stresses in the financial sector, could result in further downside to the growth scenarios.
| Summary: | The Indonesia economic quarterly reports
on and synthesizes the past three months' key
developments in Indonesia's economy. It places them in
a longer-term and global context, and assesses the
implications of these developments and other changes in
policy for the outlook for Indonesia's economic and
social welfare. The near-term global economic outlook is
fragile and emerging economies, including Indonesia, again
face the risk of a potential crisis that is not of their
making. The growth outlook for Indonesia's major
trading partners (MTP), at 3.3 percent in 2012, remains
relatively weak as increased Euro zone uncertainty adds to
the ongoing drags on global growth from budget cutting and
deleveraging in developed economies, and capacity
constraints in some developing economies. Recent
international financial market turbulence looks set to
continue in the near-term and, while this baseline scenario
remains the most likely outcome, capital flows to emerging
economies and sentiment are likely to remain volatile.
Further enhancing crisis preparedness is therefore a policy
priority for economies such as Indonesia but, at the same
time, it is important to push ahead with reforms and
investments which can support medium-term growth in what is
likely to be a weaker global economic environment.
Indonesia's gross domestic product (GDP) growth
remained a solid 6.3 percent year-on-year in the first
quarter of 2012, down slightly from an average of 6.5
percent in 2011. Seasonally-adjusted growth overall came
down off the highs of the final quarter of 2011 but
consumption growth held up well. However, investment growth
dipped and, reflecting the relative weakness of external
demand, net exports again were a drag on growth. Inflation,
although picking up somewhat, has remained relatively low
and price expectations came down with the reduced likelihood
of a subsidized fuel price increase in 2012, as oil prices
declined. In the event of a major freezing of international
financial markets which contributes to a drop in trading
partner growth. In a scenario in which such a crisis was
accompanied, or indeed precipitated, a severe, prolonged
global downturn encompassing the major emerging economies,
growth in Indonesia could drop to 3.8 percent, with the
impact of the slowdown felt more sharply in domestic
activity as commodity price falls reduce incomes and
investment. In the event of a severe crisis, it is possible
that domestic consumer and business sentiment drops sharply
which, combined with any potential stresses in the financial
sector, could result in further downside to the growth scenarios. |
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