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ndonesia is still among the preferred Southeast Asian markets for investment amid the country’s continuous fight against COVID-19, backed by strong household spending and a young working population, Singapore’s largest bank, DBS, has stated.
In a report titled “CIO Insights 3Q20” released on Monday, DBS noted that the country would quickly return to normalcy after the relaxation of the pandemic-related restrictions, while household spending – which contributes more than half of its gross domestic product (GDP) – will continue to drive the recovery.
“The investment strength in Indonesia lies in its favourable demographics. Indonesia is the third-most populous country in Asia, the fourth globally, and has a high proportion of young working adults,” the report reads.
The Indonesian market, along with regional neighbour Singapore, trade at around 13 times forward price to earnings and are deemed to be the cheapest markets in ASEAN, leaving room for earning adjustments, the report stated.
Meanwhile, with the government’s fiscal stimulus and monetary easing support, together with Indonesia’s structural demographic strength, DBS expects the economic woe from the pandemic to be over by the second quarter of this year.
With the pandemic impact on the economy, Finance Minister Sri Mulyani Indrawati has projected that the economy will contract by more than 3 percent year-on-year in the second quarter, after growth slowed to 2.97 percent in the first quarter. She expects full-year growth of 1 percent under the baseline scenario but a full-year contraction of 0.4 percent under the worst-case scenario.
Meanwhile, the Indonesian government has allocated Rp 695.2 trillion (US$ 49.3 billion) worth of COVID-19 spending to boost economic growth and strengthen its healthcare system amid the pandemic. From the total, around Rp 110 trillion of the stimulus has been allocated for social safety programs for the poor and vulnerable.
