The Jakarta Post
London-based lender HSBC forecasts Indonesia’s gross domestic product (GDP) will grow 5 percent this year, higher than its initial forecast of 4.7 percent, banking hopes on an expected influx of investment and improved business climate amid recently announced government reform programs.
Citing Investment Coordinating Board (BKPM) data, realized investment in the first quarter of this year stood at Rp 146.5 trillion (US$11 billion), a 17.6 percent year-on-year (yoy) increase, reaching 24.6 percent of the 2016 target of Rp 595 trillion.
HSBC ASEAN economist Su Sian Lim said such investment would help the country cope with external headwinds.
"Although growth in Indonesia has moderated, the slowdown has not been sharp, thanks to domestic consumption and in particular investment growth helping to offset the drag from weaker external trade," Lim said Thursday.
Lim also mentioned the government’s 12 economic stimulus packages released since September last year that centered on efforts to bolster the ease of doing business in Southeast Asia’s largest economy.
Lim, however, warned that the planned tax amnesty bill pending deliberation at the House of Representatives might become a stumbling block to wooing investors.
"It will be a disappointment for portfolio investors if the tax amnesty bill does not pass, given that state revenue collections this year have been much softer than expected due to slower economic growth," she said.
Analysts have cautioned that the planned tax amnesty for Indonesians with untaxed funds abroad could backfire and cause the rupiah to fluctuate. The tax amnesty could bring some Rp 2 quadrillion back to the country and increase tax revenues by Rp 40-60 trillion. However, many have also warned that a flood of repatriated foreign funds could also strengthen the rupiah and thereby hurt exports.
Indonesia's current account deficit currently stands at 2 to 2.5 percent of GDP.
Lim also lauded Bank Indonesia’s (BI) decision to cut the benchmark’s interest rate, saying the move could help stimulate economic activities.
However, she cautioned BI to pay attention to inflation in the second quarter.
"The low rates can benefit business immensely, but BI should wait until the second quarter to deliver the easing as policy overkill could spark upside risks to inflation in the medium term," she said. (dmr)
Your premium period will expire in 0 day(s)close x