Indonesia Country Risk Report

Providing comprehensive data and in-depth analysis of political, financial and economic risk.

Report includes: BMI's Core Views, 10-year Forecasts, BMI's Economic Risk Index, Political Stability and Risk Index, Long-term Political Outlook, Operational Risk Index, SWOT Analysis and Structural Economic Sections

Why you should buy this report

  • Understand and measure the political, business environment and operational risks to your company
  • Gain insight on emerging trends that could support, strengthen or disrupt your activities in the market
  • Benefit from 10-year macroeconomic forecasts and insight into the structural characteristics of the economy
  • Get the long-term political outlook and explore possible scenarios for change
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Indonesia Country Risk Report
Product Price
$1,195.00

Core Views

  • Indonesia's budget deficit as a share of GDP will likely deepen further to 2.5% in 2016, from our forecast of 2.3% in 2015, due to higher developmental expenditures and lower-than-projected revenue realisation. This could potentially exert upside pressure on Indonesia's sovereign bond yields over the coming quarters as the government will have to tap on the bond market to finance its revenue shortfall.

  • Bank Indonesia will likely ease its monetary policy over the coming months once it has assessed the market's reaction to the Federal Fund Rate (FFR) hike and confirmed the downtrend in inflation. However, the central bank is likely to remain relatively cautious given ongoing volatility in the rupiah, and we expect a relatively shallow rate cutting cycle of 50bps.

  • We remain bearish on the Indonesian rupiah over the short and medium term, and expect the currency to weaken further to IDR14,600/USD by end-2016 and IDR14,800/USD by end-2017. Over the course of 2016, weak economic growth momentum, external headwinds and diverging monetary policies will likely continue to undermine the rupiah.

  • Although the pro-reform Jokowi administration has been actively trying to reduce bureaucratic red tape and boost investor confidence, political infighting due to vested interest and nationalistic sentiment among the political elites have hampered the progress and efficacy of these positive developments. This will likely act as a drag on the country's economic recovery over the coming year; as such, we maintain our forecast for Indonesia's economy to accelerate only moderately in 2016, with a forecasted real GDP expansion of 5.2%.

Major Forecast Changes

  • Indonesia's real GDP growth will pick up over the coming quarters on the back of stronger investment and government spending, but persistent domestic and external headwinds will likely cap upside potential. As such, we have downgraded Indonesia's real GDP growth forecast for 2016 to 5.2%, from 5.6% previously.

Key Risks

  • Indonesia risks a return to the more polarised political environment witnessed before outgoing President Susilo Bambang Yudhoyono took office in the mid-2000s.

  • Indonesia's poor net international investment position, along with a current account deficit, makes it vulnerable to periods of acute risk aversion in the global economy. In an environment of rising global interest rates, this is an increasing risk.

Macroeconomic Forecasts (Indonesia 2014-2017)
Indicator 2014e 2015e 2016f 2017f
National Sources/BMI
Real GDP growth, % y-o-y 5.1 4.8 5.2 6.0
Nominal GDP, USDbn 888.3 878.1 907.1 981.9
Consumer price inflation, % y-o-y, eop 8.4 4.5 5.0 5.0
Exchange rate IDR/USD, eop 12,388.00 14,000.00 14,600.00 14,800.00
Budget balance, % of GDP -2.2 -2.3 -2.5 -2.9
Current account balance, % of GDP -3.1 -2.5 -1.7 -0.8
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
Cabinet Reshuffle To Boost Medium-Term Growth Outlook
8
TABLE: POLITICAL OVERVIEW
8
Long-Term Political Outlook
9
Outlook Improved, But Uncertainty Lingers
9
TABLE: CABINET RESHUFFLE
9
Chapter 2: Economic Outlook
13
SWOT Analysis
13
BMI Economic Risk Index
13
Economic Activity
14
Growth Recovery Contingent Upon Reform Momentum
14
TABLE: ECONOMIC ACTIVITY
14
GDP By Expenditure
15
Fiscal Policy
16
Fiscal Deficit To Deepen Slightly In 2016
16
TABLE: FISCAL POLICY
16
TABLE: BUDGET ASSUMPTIONS
16
Structural Fiscal Position
17
Monetary Policy
18
BI To Cut Rates In Early 2016
18
TABLE: MONETARY POLICY
18
Monetary Policy Framework
19
TABLE: BMI CURRENCY FORECAST
19
Currency Forecast
20
IDR: More Gradual Depreciation In 2016
20
TABLE: CURRENT ACCOUNT
20
Structural External Position
21
TABLE: MAIN EXPORT AND IMPORT PARTNERS
21
TABLE: MAIN EXPORTS AND IMPORTS
22
Chapter 3: 10-Year Forecast
23
The Indonesian Economy To 2024
23
A Bullish Long-Term Growth Story
23
TABLE: LONG-TERM MACROECONOMIC FORECASTS
23
Chapter 4: Operational Risk
25
SWOT Analysis
25
Operational Risk Index
25
Operational Risk
26
TABLE: OPERATIONAL RISK
26
Education
27
TABLE: ASIA - EDUCATION RISK
28
Government Intervention
32
TABLE: ASIA - GOVERNMENT INTERVENTION RISK
32
TABLE: PERSONAL INCOME AND TAX RATE
33
Chapter 5: BMI Global Macro Outlook
37
Global Outlook
37
Global Growth Weak As EMs Squeezed
37
TABLE: GLOBAL ASSUMPTIONS
37
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %
38
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
38
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %
39

Assess your risk exposure in Indonesia with our 100% independent forecasts assessing the pace and stability of this key market. Backed by trusted data from BMI Research's 52 million data point economic forecast model, this report will allow you to measure political, economic, business environment and operational risks in Indonesia with confidence.

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