RI economy remains resilient on strong investment: UOB

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Indonesia will benefit from strong investment and domestic consumption that will continue to drive growth next year, the UOB Group says.

In its recently released economic outlook, the Singapore-based bank said that Indonesia’s economy, the largest in Southeast Asia, would continue to be resilient, expanding by 6.3 percent in 2013, slightly lower than the government’s target of 6.8 percent.

“As the world’s economy is slowing down, our forecast is a bit more moderate. We see that domestic consumption and investment remain the forces behind growth next year,“ UOB Group head of research and investor relations Jimmy Koh said after a presentation in Jakarta on Tuesday.

Indonesia’s economy grew by 6.3 percent in the first quarter of 2012 and 6.4 percent in the second quarter.

The bank estimated that the nation’s economic growth rate would slow to between 6 percent and 5.8 percent in the last quarter of 2012 due to the prolonged worldwide slowdown.

In the January to September period, Indonesia has booked Rp 229.9 trillion (US$23.9 billion) in realized investments, up 7.02 percent from Rp 181 trillion last year, and has been inching closer to the government’s annual target of Rp 283.5 trillion.

UOB did not see major risks posed by trade to Indonesia. Unlike other Asian nations, Indonesia has relied more on intra-regional trade and has cut its dependency on traditional key buyers such as the US and the nations of the European Union, Koh said.

Asian markets accounted for 56.5 percent of the nation’s exports in 2011, up from 53.9 percent in 2000, while the share of its exports to the US plunged to 8.1 percent from 13.6 percent and the share of its exports to EU nations dropped to 9.3 percent from 14.3 percent.

As the Indonesian economy was on a “stronger footing” than it was during the Asian financial crisis in 1997, the nation would also see lower risks from the financial channel, Koh added.

Quantitative easing in a number of advanced economies has caused higher inflows of liquidity to other countries with faster growth rates, creating concerns about overheating and asset price inflation.

“Indonesia’s foreign reserves today stand at more than US$100 billion, as compared with less than $20 billion at the end of 1997, and this brings a different dynamic compared to 1997,” Koh said.

Speaking during the release of the outlook report, University of Indonesia economist Faisal Basri expressed optimism that Indonesia’s economy would grow by 6.8 percent next year, as targeted by the government.

“Economic growth will be greatly supported by the expansion of domestic industry, which might grow above 7 percent and for the fi rst time will likely outpace our economic growth,” Faisal said.

With such growth rates, domestic-focused businesses would contribute around 25 percent to the gross domestic product, he added.

Other industrial sectors that will experience fast growth include the textile, food and beverage, transportation equipment and base metal sectors.

Growth in those areas would be driven by increased demand domestically and overseas, according to Faisal.

— JP/Linda Yulisman