Indonesia Country Risk Report

Published 22 July 2015 | Quarterly

  • 50 pages
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  • Includes 3 free updated quarterly reports
$1,195.00
Indonesia Country Risk Report

Core Views

  • Indonesian President Joko Widodo, also known as Jokowi, has struggled to maintain his popularity since coming into power in October 2014. This trend will likely persist as Jokowi's anti-corruption drive continues to falter, while a spate of counterproductive measures and ongoing political uncertainty undermines business sentiments and economic growth.

  • Indonesia's trade balance remained in positive territory for the fifth consecutive month in April, following an improvement in the country's current account deficit to 1.8% of GDP in Q115. However, the deficit is likely to slightly widen over the coming quarters as government-backed infrastructure projects kick off in H215. As such, we maintain our forecast for Indonesia's current account deficit to come in at 2.4% of GDP in 2015.

  • Central Bank-imposed restrictions on the usage of foreign currency in domestic transactions will be negative for businesses in the near-term as the move will likely increase currency risk and reduce corporate profitability. However, the de-dollarization of the economy should help to support the ailing rupiah, which is at risk of a crisis of confidence.

  • Following the global collapse in oil prices, the Indonesian government has ramped up its tax revenue collection target in order to fund its aggressive fiscal spending programme. However, we believe that tax revenue collection will fall short of the government's ambitious target of 30% growth. As such, we maintain our forecast for Indonesia's fiscal deficit to come in at 2.4% of GDP, well above the government's forecast of 1.9%.

Major Forecast Changes

  • Indonesia's real GDP growth will likely recover versus the Q115 level over the coming quarters, but significant headwinds stemming from weak domestic demand, poor external dynamics, and failures in government infrastructure spending will likely cap upside potential. As such, we have downgraded Indonesia's real GDP growth forecast for 2015 and 2016 to 5.0% and 5.6%,...

Executive Summary
5
Core Views
5
Major Forecast Changes
5
Key Risks To Outlook
5
Chapter 1: Political Outlook
7
SWOT Analysis
7
BMI Political Risk Index
7
Domestic Politics
8
Jokowi's Popularity Likely To Wane Further
8
Table: Politic al Overview
8
Long-Term Political Outlook
9
Outlook Improved, But Uncertainty Lingers
9
Chapter 2: Economic Outlook
13
SWOT Analysis
13
BMI Economic Risk Index
13
Economic Activity
14
Economic Growth Unlikely To Rebound Significantly
14
table: Economic Activity
14
Fiscal Policy
15
Ambitious Tax Target Unlikely To Be Met
15
table: Fisc al Policy
16
table: Super Luxury Tax
16
Monetary Policy
17
FX Controls To Hit Business Outlook
17
table: Mo netary Polic y
17
Balance Of Payments
19
Deficit To Widen In Tandem With Government Infrastructure Drive
19
table: Current Account
19
Chapter 3: 10-Year Forecast
21
The Indonesian Economy To 2024
21
A Bullish Long-Term Growth Story
21
table: Long-Term Macroeco nomic Forecasts
21
Chapter 4: Operational Risk
23
SWOT Analysis
23
Operational Risk Index
23
Operational Risk
24
Table: Operational Risk
24
Market Size And Utilities
25
Table: Asia - Market Size & Uti lities Risk
26
International Security Risk
29
Table: Asia - Interstate Security Risk
30
Chapter 5: Key Sectors
33
Pharmaceuticals & Healthcare
33
table: Pharmaceutical Sales, Historical Data & Forecasts
34
TABLE : Healthcare Expenditure Trends, Historical Data & Forecasts
35
TABLE : Government Healthcare Expenditure Trends , Historical Data & Forecasts
35
TABLE : Private Healthcare Expenditure Trends , Historical Data & Forecasts
35
Telecommunications
37
table: Telecoms Sector - Mobile - Historical Data & Forecasts
38
table: Telecoms Sector - Wireline - Historical Data & Forecasts
39
Other Key Sectors
41
table: Oil & Gas Sector Key Indicators
41
table: Defence & Security Sector Key Indicators
41
table: Infrastructure Sector Key Indicators
41
table: Food & Drink Sector Key Indicators
42
table: Autos Sector Key Indicators
42
Table: Freight Key Indicators
42
Chapter 6: BMI Global Macro Outlook
43
Global Outlook
43
Event Risk Mounting But Manageable
43
Table: Global Assumptions
43
Table: Developed States, Real GDP Growt H, %
44
Table: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
44
Table: Emerging Markets, Real GDP Growth , %
45

The Indonesia Country Risk Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Indonesia. It is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market.

An influential new analysis of Indonesia's economic, political and financial prospects through end-2019, just published by award-winning forecasters, BMI  Research.

Key Uses

  • Forecast the pace and stability of Indonesia's economic and industry growth through end-2019.
  • Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
  • Assess the critical shortcomings of the operating environment that pose hidden barriers and costs to corporate profitability.
  • Contextualise Indonesia's country risks against regional peers using BMI's country comparative Risk Index system.
  • Evaluate external threats to doing business in Indonesia, including currency volatility, the commodity price boom and protectionist policies.

The Indonesia Country Risk Report by BMI  Research includes four major sections: Economic Outlook, Political Outlook, Operational Risk and Key Sector Outlook.

Economic Outlook:

How will the Indonesia' economic policy-making and performance impact on corporate profitability over 2015-2019?

BMI provides our fully independent 5-year forecasts for Indonesia through end-2019 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.

Economic Outlook Contents

The Indonesia Country Risk Report features BMI's forecasts with supporting analysis for 2015 through to end-2019, set against government views and BMI's evaluation of global and regional prospects.

Key Areas Covered:

Data:

  • Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
  • BMI's comprehensive Risk Index system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.

Written Analysis:

  • Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
  • Balance of Payments - trade and investment, current and capital account.
  • Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).
  • Exchange Rate Policy - currency controls, foreign investment flows, exchange rates and foreign exchange reserves.
  • Fiscal Policy - macroeconomic strategy and policies, government finance and tax reforms.
  • Foreign Direct Investment - approvals, inflows and climate.
  • External Debt - debt profile (short and long-term plus public and private sector obligations).
  • Global Assumptions - forecasts for each year to end-2019 covering: major commodities, growth in key regions, inflation, and interest and exchange rates, in the United States, Japan, China and the eurozone.

Key Benefits

  • Rely upon BMI's 100% independent forecast scenarios for Indonesia and underlying assumptions - we take no advertising and are privately-owned.
  • Exploit the benefits of BMI's comprehensive and reliable macroeconomic database on Indonesia, sourced and fully maintained by BMI from an extensive network of private sector, government and multilateral contacts.
  • Gain key insights into the current and future direction of government economic policy, which could significantly affect your company's business prospects, from BMI's team of analysts and economists.

Political Outlook:

What are the political risks to doing business in Indonesia over the next 5-years?

BMI's Indonesia country Risk Index evaluates the short- and medium-term threats to political stability.

Political Outlook Contents

  • SWOT Analysis for the Indonesia Market - Political Strengths, Weaknesses, Opportunities and Threats facing Indonesia.
  • Political Stability and Risk Assessment - BMI's Risk Index assesses explicit short- and long-term risks to political stability; latest positioning and trends for Indonesia's risk are compared with regional and global averages.
  • Current Administration and Policy-making BMI assesses the threats to the continuity of economic policy, and likely changes to the business operating environment.
  • Long-Term Political Outlook BMI examines the structural risks to the stability of Indonesia’s political system and the dominant public policy issues likely to affect decision-makers, and outlines scenarios for how the state could evolve in the medium to long term.

Key Benefits

  • Benchmark Indonesia's risk profile against its neighbours, the global and regional average, allowing easy comparison of risks between key business markets.
  • Identify, evaluate and anticipate political and security risks to the business environment, and to your company's current operations and future plans.
  • Gain valuable insights into government and policy-making, through BMI's specialist team of analysts and economists, and their network of private and public sector sources.

Operational Risk

What are the current operational risks and difficulties associated with doing business in Indonesia?

The Operational Risk section gives an evaluation of current risks and difficulties associated with operating in the market. It also provides a brief overview of the regional Operational Risk Index which benchmarks Indonesia against its neighbours.

Operational Risk Contents

The chapter provides a summary of the main threats in the country, within:

  • Labour Market Risk (Education; Availability of Labour; and Labour Costs)
  • Logistics Risk (Market Size and Utilities; Quality and Extent of the Transport Governance)
  • Trade and Investment Risk (Economic Openness; Government Intervention; and Legal Risks)
  • Crime and Security Risk (Crime; Terrorism; and Interstate Conflict risks).

The report also drills down in greater depth to address key issues in one of the following segments most critical to the market:

  • Transport network, economic openness, cost and availability of labour, crime risks, bureaucratic environment, market size and utilities, and interstate conflict.
  • Assess your company’s exposure to country specific operational and business risks, using BMI’s insight on the current dangers of operating in the market.
  • Evaluate Indonesia’s risk profile against its regional peers, helping you understand the market’s strengths and weaknesses in relation to other countries.

Key Sector Outlook*

Which industry sectors in Indonesia will grow fastest, and where are the major investment opportunities in the market?

BMI identifies investment opportunities in Indonesia's high growth industries including automotives, defence & security, food & drink, freight transport, infrastructure, oil & gas, pharmaceuticals & healthcare and telecommunications & IT.

Key Areas Covered:

  • Market Overview - Size and value of each industry, including recent sector developments and major industry key performance indicators (KPIs) that have impacted company performance.
  • 5-year Industry Forecasts - Forecasts for each year over 2015-2019, using BMI's proprietary industry modelling technique, which incorporates key domestic and international indicators - including economic growth, interest rates, exchange rate outlook, commodity prices and demographic trends - to provide fully integrated forecasts across and within each industry.
  • Demand- and Supply-Side Data/Forecasts - BMI's industry data covers both the output of each industry and the domestic demand, offering clear analysis of anticipated import/export trends, as well as capacity growth within each industry.

Key Benefits

  • Target strategic opportunities in high growth industries, which are benefiting from global mega trends, and thus offer strong investment and growth opportunities.
  • Compare the growth path of different industries to identify which are best placed to benefit from domestic and international economic prospects, and which have historically suffered from volatile growth trends - a key indicator of future risks.

*Not all Country Reports contain the Key Sector Outlook chapter. Please enquire above for more information.

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