Investors have maintained an upbeat outlook on Indonesia’s economy, despite the likelihood of inflation and interest rate rises this year, according to Fidelity.
“Optimism abounds about a country that fewer than 15 years ago almost collapsed politically and economically – even if it still has many challenges such as a lack of infrastructure and an abundance of red tape,” Fidelity investment commentator Michael Collins said.
“It’s not just investors who are upbeat about an economy that is posting a current account surplus of around 1 per cent of GDP (gross domestic product), where the government’s finances are under control and where inflation, while troublesome, is well below the double digits recorded as recently as 2002.”
Furthermore, the International Monetary Fund expects the Indonesian economy to grow between 6 per cent and 7 per cent in the coming four years.
“In December, the government articulated an economic vision for 2025 that sees Indonesia as one of the 10 largest economies in the world with a per capita GDP of US$12,800 to US$16,160, from about US$4000 now,” Collins said.
Indonesia’s stock market last year was the star performer among the 10 countries in the MSCI Asia ex-Japan Index for a second consecutive year, however, 2011 had not been as stellar, he added.
“The Jakarta Composite Index rallied 46 per cent last year, after soaring 87 per cent in 2009, as investors chased stocks benefiting from an economy rejuvenated by reform,” he said.
While Indonesia’s president had implemented reforms and introduced stimulus measures to shepherd the economy through the global recession, he said Indonesia’s economy grew at an average annual pace of 5.5 per cent in the past three years as a result.
“Investors thought the world’s fourth most-populous country of 240 million people could maintain that growth rate in coming years,” he said.
“But that thinking didn’t last too long into 2011. On January 3, the Central Bureau of Statistics said consumer prices in Indonesia jumped 6.96 per cent in 2010.
“Stocks fell on a view that the central Bank Indonesia will need to raise the benchmark reference rate by 100 basis points over 2011 to slow the economy and lower consumer inflation to under 6 per cent.”
